Rishi Sunak’s £30billion coronavirus bail-out may have missed many of its economic targets and there will be a “reckoning” of higher taxes, experts have warned.
The independent Institute for Fiscal Studies (IFS) said taxes would eventually have to go up to pay for repairing the battered public finances.
The IFS’s traditional morning-after debrief of the chancellor’s statement questioned whether the billions of extra spending announced by Sunak is enough or would offer value for money in the face of recession that was the “deepest in our history”.
The well-regarded independent research institute challenged the impact of Sunak’s most eye-catching announcements including the “eat out to help out” meal discount scheme and the VAT cut for the hospitality industry.
Helen Miller, IFS deputy director, said businesses would not pass on the VAT cut to customers so “the firms that benefit most would be those who have the highest sales, who are operating closest to normal”.
She also questioned why the eat out to help out scheme did not include takeaways.
She said: “Just a week ago we thought the risks of eating in restaurants were sufficiently high that we banned it.
“Now we are effectively saying that in August we are going to make takeaways relatively more expensive than eating in, even for the same food eaten from the same establishments.”
Miller added that the temporary stamp duty holiday announced by Sunak for house sales under £500,000 in England could push up house prices.
The measure has already been criticised as helping already established home owners and buy to let landlords.
Paul Johnson, head of the IFS, said the furlough return bonus for employers would be wasted on companies already taking many workers back.
Johnson said: “A lot, probably a majority, of the job retention bonus money will go in respect of jobs that would have been, indeed already have been, returned from furlough anyway.
“This money will go even in respect of jobs which were briefly furloughed, are already back at work and can expect to be still back at work in January, the employer still gets £1,000.”
Carl Emmerson of the Institute warned that managing the elevated debt from the crisis would be a task “for not just the current Chancellor, but also many of his successors”.
He said: “It’s going to take decades before we manage that debt down to the levels we were used to pre this crisis.”
Johnson added: “The time to pay for all this will come. But not this year and not next. Our capacity to do so will depend above all on how the economy recovers.
“But let’s hold in the back of our minds that a reckoning, in the form of higher taxes, will come eventually.”
