Minister blurts out budget plan to extend furlough a day early

Former Tory leader and mentor to chancellor warns taxes will have to rise

Andrew Woodcock
Political Editor
Wednesday 03 March 2021 11:24

A cabinet minister has blurted out Rishi Sunak’s plan to extend furlough support for workers a day ahead of its announcement in the Budget.

Business secretary Kwasi Kwarteng told BBC Radio 4’s Today programme that there had already been a “public announcement” that the job retention scheme - which provides up to 80 per cent of wages for staff who would otherwise be laid off during the coronavirus pandemic - will be continued.

But the chancellor had in fact not committed himself publicly to continuing the scheme, which has already cost £46bn.

Mr Kwarteng’s blunder came as former Tory leader William Hague, a close ally of the chancellor, said that taxes will have to go up in the coming years to pay for the cost of coronavirus.

Read more: What time is the Budget announcement tomorrow?

Mr Sunak is known to consult regularly with Lord Hague, who was the previous MP for his Richmond seat, and the Tory peer’s comments were seen as foreshadowing the likely announcement in Wednesday’s Budget of a package of tax hikes to be introduced gradually as the economy recovers from the pandemic.

Writing in the Daily Telegraph, Lord Hague said: “It pains me to say, after spending much of my life arguing for lower taxes, that we have reached the point where at least some business and personal taxes have to go up.”

Mr Sunak faces stiff opposition from Tory backbenchers to increases in taxes on businesses and individuals. But Lord Hague warned that those who opposed some form of tax rises at a time when the UK’s national debt stands at a historic high of £2trn were buying into “dangerous illusions”.

Meanwhile, former chancellor Philip Hammond said that public spending will have to be cut as part of the effort to balance the public finances.

“I think we have got to get a balance right between restraining public spending and increasing taxes and we’re going to have to do both,” Lord Hammond told Times Radio .

“Anybody who says that the challenge can be met only by increases in taxation, or only by cuts in public spending is not being straight with people.

“The scale of this problem means that we are going to have to do both.”

Mr Kwarteng played down the prospect of immediate large tax increases but said the chancellor had acknowledged the country could not “go on spending money forever”.

“For now, what we have to do is support businesses, individuals, families, through what has been an extremely difficult time,” he told BBC Breakfast.

“We have got another three years to run in the parliament and the chancellor will be looking to reduce the deficit.

“For now, I think the real emphasis is on trying to provide critical support.”

He told BBC Radio 4’s Today it was a “fairly good assumption that while lockdown persists there will be additional support”.

“I think it is really important that we don’t crush the recovery before it’s happened,” he said.

“In order to keep people’s jobs going, in order to keep companies going we need to continue providing support. I think there is every indication that is what the chancellor will do.

“My view is that the way to get out of this difficult situation is to grow the economy.”

Mr Kwarteng appeared to go too far in setting out Mr Sunak’s plans when he told Today: “I think the chancellor has already indicated that we will be extending furlough.

“I think that has been part of a public announcement. I think there will be other measures that we will see tomorrow.”

In a round of interviews over the weekend, Mr Sunak hinted strongly that furlough and other business support schemes like rates relief and VAT breaks will be extended in line with Boris Johnson’s 21 June timetable for ending social and economic restrictions. But he stopped short of specific commitments, saying he would not comment on the fate of individual programmes.

The Office for Budget Responsibility (OBR) will publish its latest forecasts alongside the Budget on Wednesday – with Boris Johnson expecting a recovery to be “much stronger than many of the pessimists have been saying over the last six months or so”.

In its November forecasts the OBR indicated the national debt could reach 105% of gross domestic product in 2020/21, with a record peacetime borrowing of £394 billion.

Ahead of Wednesday’s Budget:

– It was revealed nearly £410 million will support the badly-hit culture sector.

– A £300 million summer sports recovery package will help cricket, tennis and horse racing.

– A £150 million fund will help local communities save struggling pubs, sports clubs, theatres and Post Offices.

– A £520 million initiative will be announced to support small UK businesses with training and software.

– Some £2.8 million will help fund a joint UK and Ireland bid to host the 2030 football World Cup.

– The fuel duty freeze is set to continue, with Prime Minister Boris Johnson telling The Sun: “I firmly believe the economic recovery is going to be powered by White Van Man amongst others.”

The Treasury set out details of the funding packages for the beleaguered culture, sport and pub trades which have seen profits and activity knocked since social distancing was introduced at the start of the Covid-19 outbreak last year.

Mr Sunak is expected to pump an extra £300 million into the £1.57 billion Culture Recovery Fund, as part of the measures.

National museums and cultural bodies will also receive £90 million to help keep them afloat until they can open their doors on May 17 at the earliest and £18.8 million will be provided for community cultural projects.

An additional £77 million will be given to the devolved administrations in Scotland, Wales and Northern Ireland to provide their culture groups with similar backing.

Shadow chancellor Anneliese Dodds said that businesses had been “calling for weeks and weeks for certainty around things like the business rates holiday extension” and “clarity” over the furlough scheme.

Amid speculation that Mr Sunak could impose tax rises in order to cut them again ahead of the next election, Ms Dodds said the Tories were “focused potentially on party political issues, how quickly they could get any tax changes through, that’s not what’s needed for our economy right now”.

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