Sunak’s tax hike budget helps push up inflation, MPs say

Rishi Sunak latest budget According to an influential group of all-party MPs, this has led to a rise in inflation and current government policies risk a wage price spiral.

In its report on the October Budget, the Treasury Committee also warned that, Taxes will be higher The next election will be better than the last, even if the prime minister offers some sweeteners before people go to vote.

A Conservative MP-led committee has accused the government of worsening behaviour amid rapidly rising energy, food and petrol prices The cost of living crisis in the UK Reading would be uncomfortable for the Prime Minister.

The committee pointed out that Sunak’s plan to increase National Insurance contributions from April to clear the NHS treatment backlog and fund social care reforms would increase costs for employers as half of the tax increase is paid by companies They bring pressure to raise prices.

Some Conservative ministers call on Sunak Delay or cut increases. Jacob Rees-Mogg, The leader of the House of Commons and former Brexit secretary, Lord David Frost, has spoken out against the plan, while business secretary Quasi Kwaten has criticized it. However, allies of the chancellor insisted there was no discussion of a delay in taking office.

Committee also finds ‘massive fiscal easing’ in Budget Public spending rises more than expected, will also push up prices.

MPs have not held back their criticism of the prime minister, warning Boris Johnson that his demands for higher wages are dangerous and bad economic policy.

Mel Stride, chairman of the committee, said: “While the Prime Minister’s ambition to drive high wage growth is worthwhile, a focus on increasing wages without increasing productivity could lead to inflation and a potential wage price spiral. risks of.”

Higher inflation will raise the cost of servicing government debt, because it directly increases bond payments linked to higher prices, and because it increases the likelihood that the Bank of England will raise interest rates.

The committee acknowledged that Sunak had shown he was “vigilant about rising inflation and entrenched fiscal risks to interest rates” and urged the Treasury to “put these risks at the forefront of their consideration when designing policy in future fiscal events”.

Higher inflation doesn’t always hurt public finances, and could lead to less borrowing if wages or profits rise enough to bring in more tax revenue than expected.

But the committee said public finances could be tough in the coming years, and even if public finances continued to improve, there was little scope for big tax breaks before the next election.

With the tax burden in this parliament already rising to levels not seen in peacetime, with National Insurance, income and corporate taxes rising, MPs say the pre-election tax cuts that Sunak has hinted at will not reverse the actions already taken.

The committee said: “For the tax burden as a percentage of GDP to be lower at the end of this parliament than at the beginning already appears to be a significant challenge, as the chancellor’s tax increases have been announced and his fiscal space to reduce them small.”

Additional reporting by George Parker

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