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Targeting the wealth creators to pay coronavirus bill would be madness, writes ALEX BRUMMER

With a Budget looming this autumn and Britain’s national debt standing at extraordinary levels, it will come as no surprise that the Treasury is dusting off plans for big tax rises.

Rishi Sunak’s pandemic spending splurge has driven the annual borrowing requirement and the nation’s debt to £2trillion – a level unseen in peacetime – and fiscal restraint is in the DNA of Treasury mandarins. 

In the run-up to budgets, it has become almost a ritual that controversial tax proposals are briefed to the media to appraise public opinion and strangle unpopular policies at birth. 

Yet what is shocking is that the tax proposals being floated in the Chancellor’s name are directed at Britain’s wealth-creators and corporations. 

Tax proposals floated in Rishi Sunak's name are being directed at Britain's wealth-creators and corporations

These are the very groups that the country needs to help it pull out of the deepest dive in output since the Great Depression and the threat of the highest unemployment since the 1980s. 

On the table is an estimated £30billion plan for a dramatic increase in corporation tax and a sharp hike in the levy on capital gains to bring this in line with income taxes. 

These are policies that could have come straight from Labour’s disastrous suicide manifesto, on which it fought and lost the December 2019 election. 

The only element likely to find any support on the Conservative backbenches and in the shires is one to take an axe to the UK’s ever-swelling budget for international aid, currently running at close to £14billion annually. 

It will eventually be necessary to tackle the debt mountain. 

The bills for furlough, the NHS and Rishi Sunak’s Eat Out to Help Out scheme for cheap meals will have to be paid for. 

Successive Chancellors have missed the opportunity to impose meaningful levies on digital giants such as Amazon and Apple, which have seen earnings and market values soar during lockdown

Successive Chancellors have missed the opportunity to impose meaningful levies on digital giants such as Amazon and Apple, which have seen earnings and market values soar during lockdown

It goes without saying there is no such thing as a free lunch. But to start paying down debts with a slump looming and Covid19 blighting economic prospects would be an act of lunacy. 

Raising taxes into a recession – even if supposedly aimed at the rich – would only make the downturn even deeper and puts more jobs and incomes at risk. 

It would run contrary to advice from the world’s leading economic thinkers including those at the normally super-cautious International Monetary Fund in Washington. 

Indeed, raising the tax on companies from 19 per cent to 24 per cent – a policy stolen straight from Jeremy Corbyn – could do immense harm to Britain’s global competitiveness as the UK limbers up to leave the EU with or without a comprehensive trade agreement. 

All the evidence shows that since former Tory chancellor George Osborne began the process of cutting the taxes on companies, revenues have risen sharply. 

Big firms such as the advertising giant WPP – which fled to Dublin to take advantage of low Irish rates – returned to these shores. 

Taxes on companies and wealth would be a hammer blow to the entrepreneurship and enterprise that will be needed to lift the UK economy out of the stupor created by Covid-19. 

There are already signs that Britain’s resilient economy is bouncing back after being the worst-performing of the world’s seven richest democracies in the second quarter of the year. 

Mr Sunak could have more acceptable revenue-raising options. 

For too long, successive Chancellors have missed the opportunity to impose meaningful levies on digital giants such as Amazon and Apple, which have seen earnings and market values soar during lockdown. 

The Chancellor could not be blamed either if he were to consider suspending the ‘triple lock’ on state pensions, under which senior citizens get a guaranteed annual rise of the best of inflation, average earnings or 2.5 per cent. 

While the scale of our national debt may be daunting, the truth is that there has never been a better time to borrow since interest rate records were first kept in the 17th century

While the scale of our national debt may be daunting, the truth is that there has never been a better time to borrow since interest rate records were first kept in the 17th century

However, to break or ease the triple lock, even in times of economic emergency, would mean breaching a manifesto commitment and would hurt millions of retirees. 

If anything, instead of targeting Britain’s firms for corporation tax increases, Mr Sunak should be looking at ways of supporting them further. 

The pandemic has demonstrated the value of research and development (R&D) tax breaks for the UK’s biotech and pharmaceutical sector, which promise vaccinations and other treatments for Covid-19. 

Further well-directed R&D tax breaks would help incentivise breakthroughs in medicine, greener transport and fuel cells as well as financial technology. Similarly, cutting employers’ national insurance payments, when furlough ends, could limit the damage to jobs. 

Besides, while the scale of our national debt may be daunting, the truth is that there has never been a better time to borrow since interest rate records were first kept in the 17th century. 

The official bank rate is at 0.1 per cent and on the money markets, where government debt is traded, some UK bonds or gilt-edged stocks are changing hands at negative rates, meaning investors are in effect paying the Government money to hold bonds.

Yes, Boris Johnson and Mr Sunak will need to set out credible medium-term plans for future taxation and spending if Britain is to retain the confidence of the City and global markets. 

But to act prematurely this autumn and to target companies and capital would be a betrayal of all the values of freemarket Toryism. 

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