Institute Says UK Chancellor's Spending Plans Not Deliverable 'Without Considerable Pain'

MOSCOW (UrduPoint News / Sputnik - 04th March, 2021) UK finance minister Rishi Sunak's plans to plow 65 billion Pounds ($90 billion) into the country's economy to protect jobs and businesses amid the ongoing COVID-19 pandemic are not deliverable "without considerable pain," the Institute for Fiscal Studies (IFS) said on Thursday.

Among the measures announced in parliament by Sunak, the chancellor of the exchequer, is a six-month extension to the UK's furlough scheme, which sees the government cover up to 80 percent of workers' wages for hours not worked due to the pandemic.

The finance minister also extended the business rates holiday, and announced new cash grants for self-employed workers and businesses set to reopen once COVID-19 social distancing measures have been eased, but the IFS expressed doubts that Sunak could deliver on his plans.

"His spending plans in particular don't look deliverable, at least not without considerable pain," the IFS said.

In order to recoup the funds, Sunak announced an increase in corporation tax for businesses that earn more than 50,000 pounds in profits a year, with the rate rising from 19 percent to 25 percent for firms that rake in an annual profit of 250,000 pounds or more from 2023 onwards.

The chancellor also said that the thresholds for income tax allowances, inheritance tax, and capital gains tax would all be frozen from 2022 to 2026, no longer rising with inflation annually.

According to the IFS, the income tax allowance freeze will generate approximately nine billion pounds, and the corporation tax hike could raise 17 billion pounds by 2025/26, the Office for Budget Responsibility said on Wednesday.

"Take account of the cuts to planned spending announced in the Autumn and Santa Sunak, purveyor of billions today looks more like Scrooge Sunak cutting spending and raising taxes to the tune of nearly �50 billion relative to his pre-pandemic plans of March 2020," the IFS said.

Sunak's spending plans were heavily criticized by UK Labour Party leader Keir Starmer, who slammed the government for failing to increase the salaries of National Health Service workers.

The UK economy contracted by 9.9 percent in 2020, the largest fall since modern-day records began, as a result of the fallout from the COVID-19 pandemic.