London Daily

Focus on the big picture.
Wednesday, Oct 22, 2025

Rishi Sunak flags tax rises in budget as total Covid spending tops £400bn

Rishi Sunak flags tax rises in budget as total Covid spending tops £400bn

Tax increases required for businesses and workers to repair public finances, says chancellor


Rishi Sunak has outlined tax rises on companies and workers to pay for an additional £65bn of financial support to see Britain through the coronavirus pandemic, taking total government spending on the crisis to more than £400bn.

The chancellor trailed before the budget that he would extend the furlough scheme until September, and allocated billions of pounds in business grants and tax cuts to help employers while lockdown restrictions remain and the economy takes time to recover from the worst recession in 300 years.

Giving his budget speech in the Commons, Sunak said he would continue to do “whatever it takes” while it took time for growth to bounce back after restrictions have been lifted. “It’s going to take this country, and the whole world, a long time to recover from this extraordinary economic situation. But we will recover,” he said.

However, he said the rate of corporation tax would need to go up to 25% for the most profitable companies in Britain from April 2023, in a major reversal of Conservative economic policy of recent decades, to pay for the damage to the exchequer inflicted by Covid-19.

Aiming to raise £17bn a year by the middle of the decade, Sunak’s plan to increase the rate of corporation tax for the first time since Denis Healey in 1974 will, however, threaten a backlash from backbench Tory MPs more typically in favour of lower tax policies.

Plans to raise billions more from income taxes through a freeze in the threshold at which workers start paying them is also politically delicate ground for the Tories after promising in the 2019 election to keep taxes low. Although committing not to raise income tax, national insurance and VAT at the election, he set out plans for a stealth raid – holding the threshold for basic and higher rate earners steady until 2026, in a move that should raise about £8bn a year within five years.


Making his 15th crisis-related announcement in a year when the pandemic crashed Britain’s economy into the deepest recession for more than 300 years, the chancellor said his priority was to see the economy emerge from the third lockdown without triggering mass unemployment and a wave of business failures.

Official figures announced by the chancellor forecast the British economy to grow by 4% this year, recovering from an almost 10% drop in 2020, with rapid progress on the vaccination programme enabling the economy to return to its pre-pandemic level by the middle of next year – six months earlier than expected.

Sunak said the budget deficit – the gap between spending and receipts – would, however, soar to a peacetime record of £355bn this year, or 17% of GDP, in a reflection of the scale of the government response to Covid-19. But because of his actions to raise taxes, the deficit is expected to shrink to less than 3% of GDP by the time of the next election in the middle of the 2020s.


Keir Starmer, the Labour leader, said the budget “papered over the cracks” rather than setting out concrete plans to rebuild the foundations of Britain’s economy in stronger form than before the pandemic.

“I’m afraid this budget won’t feel so good for the millions of key workers who are having their pay frozen, for the businesses swamped by debt and the families paying more in council tax and the millions of people who are out of work or worried about losing their job,” he said.

Seeking to pin personal responsibility on Sunak for other government decisions about tackling the pandemic, Starmer said “after 11 months in this job it’s nice to finally be standing opposite the person actually making decisions in this government”.


He also blamed “the chancellor’s decisions” for Britain facing a “worse economic crisis than any major economy”, accusing him of having blocked a “circuit-breaker” in September 2020 to clamp down earlier on rising Covid cases.

On policy, the Labour leader said the budget was “almost silent” on the NHS and social care, and that the measures announced on Wednesday “stop way short of what was needed” to tackle the climate emergency.

The government’s plan to offer 5% mortgages was also a “failed policy” “lifted” from the former chancellor George Obsorne, Starmer said, and new support for approximately 600,000 self-employed people “fell far short of what’s needed”.


Crucially, Starmer seemed to lend his support to corporation tax rising “in the long run”, but he said Sunak was “itching to get back to his free-market principles and pull away support as quickly as he can”.

“One day we’ll all be able to take our masks off and so will the chancellor and then you’ll see who he really is,” the Labour leader added.

Conservatives broadly rallied round Sunak, though the Tory chair of the Treasury select committee, Mel Stride, admitted concern that no plan was revealed to help small and medium-sized companies manage high levels of debt they may have built up to stay afloat.

“Many of those businesses will struggle with the level of debt they have and will not be growing when we want them to be creating the jobs of the future,” he said.

And Julian Knight, a Tory MP who chairs the digital, culture, media and sport select committee, added it was “greatly disappointing” no cancellation insurance scheme for festivals was promised, to give a “safety net” to organisers hoping to hold events this summer.

Newsletter

Related Articles

0:00
0:00
Close
White House Announces No Imminent Summit Between Trump and Putin
US and Qatar Warn EU of Trade and Energy Risks from Tough Climate Regulation
Apple Challenges EU Digital Markets Act Crackdown in Landmark Court Battle
Nicolas Sarkozy begins five-year prison term at La Santé in Paris
Japan stocks surge to record as Sanae Takaichi becomes Prime Minister
This Is How the 'Heist of the Century' Was Carried Out at the Louvre in Seven Minutes: France Humiliated as Crown with 2,000 Diamonds Vanishes
China Warns UK of ‘Consequences’ After Delay to London Embassy Approval
France’s Wealthy Shift Billions to Luxembourg and Switzerland Amid Tax and Political Turmoil
"Sniper Position": Observation Post Targeting 'Air Force One' Found Before Trump’s Arrival in Florida
Shouting Match at the White House: 'Trump Cursed, Threw Maps, and Told Zelensky – "Putin Will Destroy You"'
Windows’ Own ‘Siri’ Has Arrived: You Can Now Talk to Your Computer
Thailand and Singapore Investigate Cambodian-Based Prince Group as U.S. and U.K. Sanctions Unfold
‘No Kings’ Protests Inflate Numbers — But History Shows Nations Collapse Without Strong Executive Power
Chinese Tech Giants Halt Stablecoin Launches After Beijing’s Regulatory Intervention
Manhattan Jury Holds BNP Paribas Liable for Enabling Sudanese Government Abuses
Trump Orders Immediate Release of Former Congressman George Santos After Commuting Prison Sentence
S&P Downgrades France’s Credit Rating, Citing Soaring Debt and Political Instability
Ofcom Rules BBC’s Gaza Documentary ‘Materially Misleading’ Over Narrator’s Hamas Ties
Diane Keaton’s Cause of Death Revealed as Pneumonia, Family Confirms
Former Lostprophets Frontman Ian Watkins Stabbed to Death in British Prison
"The Tsunami Is Coming, and It’s Massive": The World’s Richest Man Unveils a New AI Vision
Outsider, Heroine, Trailblazer: Diane Keaton Was Always a Little Strange — and Forever One of a Kind
Dramatic Development in the Death of 'Mango' Founder: Billionaire's Son Suspected of Murder
Two Years of Darkness: The Harrowing Testimonies of Israeli Hostages Emerging From Gaza Captivity
EU Moves to Use Frozen Russian Assets to Buy U.S. Weapons for Ukraine
Europe Emerges as the Biggest Casualty in U.S.-China Rare Earth Rivalry
HSBC Confronts Strategic Crossroads as NAB Seeks Only Retail Arm in Australia Exit
U.S. Chamber Sues Trump Over $100,000 H-1B Visa Fee
Shenzhen Expo Spotlights China’s Quantum Step in Semiconductor Self-Reliance
China Accelerates to the Forefront in Global Nuclear Fusion Race
Yachts, Private Jets, and a Picasso Painting: Exposed as 'One of the Largest Frauds in History'
Australia’s Wedgetail Spies Aid NATO Response as Russian MiGs Breach Estonian Airspace
McGowan Urges Chalmers to Cut Spending Over Tax Hike to Close $20 Billion Budget Gap
Victoria Orders Review of Transgender Prison Placement Amid Safety Concerns for Female Inmates
U.S. Treasury Mobilises New $20 Billion Debt Facility to Stabilise Argentina
French Business Leaders Decry Budget as Macron’s Pro-Enterprise Promise Undermined
Trump Claims Modi Pledged India Would End Russian Oil Imports Amid U.S. Tariff Pressure
Surging AI Startup Valuations Fuel Bubble Concerns Among Top Investors
Australian Punter Archie Wilson Tears Up During Nebraska Press Conference, Sparking Conversation on Male Vulnerability
Australia Confirms U.S. Access to Upgraded Submarine Shipyard Under AUKUS Deal
“Firepower” Promised for Ukraine as NATO Ministers Meet — But U.S. Tomahawks Remain Undecided
Brands Confront New Dilemma as Extremists Adopt Fashion Labels
The Sydney Sweeney and Jeans Storm: “The Outcome Surpassed Our Wildest Dreams”
Erika Kirk Delivers Moving Tribute at White House as Trump Awards Charlie Presidential Medal of Freedom
British Food Influencer ‘Big John’ Detained in Australia After Visa Dispute
ScamBodia: The Chinese Fraud Empire Shielded by Cambodia’s Ruling Elite
French PM Suspends Macron’s Pension Reform Until After 2027 in Bid to Stabilize Government
Orange, Bouygues and Free Make €17 Billion Bid for Drahi’s Altice France Telecom Assets
Dutch Government Seizes Chipmaker After U.S. Presses for Removal of Chinese CEO
Bessent Accuses China of Dragging Down Global Economy Amid New Trade Curbs
×