Sunak to use full ‘fiscal firepower’ to help companies and workers

Chancellor Rishi Sunak will on Wednesday promise to deploy the government’s full “fiscal firepower” to help UK companies and workers come through the Covid-19 pandemic, but his Budget will come with a bill attached.

Sunak will promise to do “whatever it takes” to support the British people and business through this “moment of crisis”, including an expected extension of the furlough and other support schemes.

But he will also prepare the country for tax rises. “Once we are on the way to recovery, we will need to begin fixing the public finances and I want to be honest today about our plans to do that,” he will say.

Sunak’s Budget will follow the dictum of Janet Yellen, US Treasury secretary, that governments should “act big” during the crisis, but the chancellor will also inject a dose of fiscal conservatism for the future.

The Budget is expected to set out a path for future tax rises — including increased corporation tax — to start repairing damage to the public finances caused by the lasting “scarring” effect of the pandemic.

The chancellor is also expected to stage a series of “stealth” tax increases — freezing allowances and income tax thresholds to increase revenue for the exchequer through the rest of the parliament.

Sunak’s second Budget will also see the chancellor outline his plans for a more “nimble” economy after the crisis has passed, including new rules for the City of London to help it attract fast-growth companies.

Plans to “level up” the economy will include the creation of new “freeports”, the devolution of Whitehall jobs to the north and midlands, and a plan for more green investment through a new national infrastructure bank.

Sunak will frame his second Budget as being about “support, honesty and building the UK’s future economy”. Some Tory MPs are expected to oppose his plans for higher taxes.