Fiscal in Focus

Headlines over the weekend suggested that Chancellor Sunak is considering a GBP30bln tax increase with almost all the tax hike coming from businesses or the wealthy. The rumoured plans are said to include an increase in capital gains tax to equate it with income tax (this would particularly hit owners of second homes and those with large equity portfolios) and an increase in taxes on pension contributions (pension contributions are currently made from gross rather than net pay giving a bigger benefit to higher rate tax payers). Corporation tax is said to be under consideration for an increase from 19% to 24% a level closer to the global developed market norm but still fairly low by European standards (but this has obviously been met by resistance from businesses which are already struggling amid lower demand from the pandemic). Foreign aid may also be cut but the most politically risky move could be a consideration of the end of the "triple lock" for pensions. This sees state pensions rise by a minimum 2.5% or by inflation or average earnings if either of these are higher than 2.5%. It was a Conservative party pledge to maintain the triple lock in the December 2019 general election and the Conservatives have a lot of support from older voters so this would affect a large number of their core voters.