A bold move by Prime Minister Boris Johnson and one which could cost him heavily at the ballot box. By raising taxes he has broken an election pledge but we are living in rather extraordinary times and to be honest he probably had little option. He could have raised the money through brutal spending cuts and by cutting the budgets of other departments. This was not really an option.
The government could have borrowed the money but the government is already heavily in debt. So tax increases was the only way forward. I am sure that this was not a move which Johnson would have taken lightly. “It would be wrong for me to say that we can pay for this recovery without taking the difficult but responsible decisions about how we finance it,” Johnson told parliament. “It would be irresponsible to meet the costs from higher borrowing and higher debt,” he said.
You can´t really disagree with him. For once Johnson has shown some leadership and taken an unpopular decision. He will face a revolt by some of his MPs and I suspect that the popularity of his government will suffer. Business leaders will say that now is not the time for higher taxes but there is never a right time. Could the additional tax burden damage the economic recovery after Covid? Yes, it probably will but Johnson doesn´t have a magic wand and money can´t just be found. Prime Ministers have to take unpopular decisions and this is the right decision.