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Chancellor Rishi Sunak should ensure that next month’s budget ensures economic recovery from the COVID-19 crisis to date rather than trying to start fixing public finances, according to a report.
Analysis by the Institute for Fiscal Studies (IFS) and Citi Research warns of an impact for lower-income households in the future, particularly if the licensing plan does not extend beyond April.
The study, which examines the options facing 11 Downing St, suggests that failure to maintain employment support risks a rise in the unemployment rate above its current 5% as businesses struggling collapse under the weight of additional wage pressure.
He suggested that the Job Retention Plan, and other support packages, be phased out to allow an adjustment to normalcy and, as a result, protect the worst off after one year of employment. COVID-19 breaking off.
The report argued that the £ 20-a-week increase in universal credit will continue beyond March 31 despite an estimated additional cost of £ 6.5bn.
He noted that the better-off were in a good position to take on a greater tax burden, having collectively accumulated an additional £ 125 billion in savings over the past 11 months.
However, the IFS said it was not the time to stifle growth prospects with major tax increases on March 3.
IFS Director Paul Johnson said the Chancellor’s second budget, her 15th major fiscal event, should strike a balance between targeted aid and “pulling the economy out of general support.”
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How deep is the economic damage?
He said: “In the recovery phase (Mr Sunak) needs to support employment and investment, but he also crucially needs to recognize and address the multiple inequalities exacerbated by the crisis.
“Fiscal policy should be supported by the effects of a looser monetary policy (from the Bank of England) that has again benefited the oldest and richest at the expense of the youngest and poorest.”
The report said Brexit and the country’s climate targets were additional pressures on the chancellor, who is on track to borrow more than £ 400 billion in the current financial year alone to pay for the government’s pandemic response.
That is the highest annual sum ever recorded in peacetime.
The chancellor confirmed last week, after official figures showed the worst performance for the economy In more than 300 years, your budget would focus on jobs to ensure that £ 50 billion spent to date is not wasted.
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The scheme, along with aid for the self-employed, grants and loans, has been credited with saving millions of livelihoods.
The study said that a strong economic recovery and increased tax revenue may avoid the need to raise approximately £ 60bn in taxes to put loans on a sustainable footing.
Johnson added: “That growth may be fast enough that large fiscal deficits largely dissipate on their own.
“But that’s not a core expectation – we are most likely headed for ongoing unsustainable deficits.
“For now, Mr. Sunak must focus on support and recovery. A reckoning in the form of large tax increases is very likely in the future, but it is not yet inevitable.”
