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Law360 (July 7, 2020, 1:23 PM EDT ) U.K. Prime Minister Boris Johnson said his party will stick to promises made during the December election campaign not to raise taxes despite the huge cost of the novel coronavirus pandemic.
Johnson, visiting the site of a new railway equipment factory Monday, vowed to keep the Conservative Party's pledge, made in its December election manifesto, that it would not raise the rate of value-added tax, income tax or social security tax. His comment, in response to a question from a reporter with the regional Yorkshire Post, comes after the economic impact of the pandemic has caused tax receipts to plummet while government spending has skyrocketed.
The U.K. Office for Budget Responsibility said £120 billion ($151 billion) has been spent on economic measures to combat the effects of the pandemic, such as paying wages to workers who can't work due to the country's lockdown. Despite this, Johnson said his pledge not to raise these taxes during his first full term as prime minister still stands.
In May, a leaked HM Treasury document showed that Johnson's government was considering tax increases and spending cuts as early as this year in the belief that the U.K. budget deficit will hit £337 billion by the end of the current fiscal year in April 2021.
Prior to pandemic, the deficit was projected to be £55 billion.
Tax increases and spending cuts could raise up to £30 billion by adding 5 pence on the pound to the basic rate of income tax, freezing pay in the public sector for two years or ending mandatory above-inflation pay increases for the state pension, according to the document.
Johnson's pronouncement comes just a day before the head of HM Treasury, Chancellor of the Exchequer Rishi Sunak, is due to give an economic update. He is widely expected to announce new measures to help the U.K. economy and public finances weather the pandemic.
Sunak will use what is being billed as a minibudget to announce measures to boost consumer demand, according to reports. The Resolution Foundation, a center-left economic think tank, has proposed giving each person a voucher to be spent in the hardest-hit industries to target aid to struggling businesses in a way that cash transfers or VAT cuts could not do.
HM Treasury didn't immediately respond to a request for comment.
--Editing by Neil Cohen.
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