Britain’s finance ministry is canvassing private bankers over how the country’s richest citizens might help pay for the soaring cost of coronavirus relief packages, with potential tax hikes likely to sit high on the agenda.
Government officials are contacting executives at major banks and wealth management firms to sound them out on options to replenish depleted public coffers, according to one senior banker invited to share their views.
Britain’s emergency public spending surge and tax cuts in response to the pandemic are forecast to cost around £133 billion this financial year and lift its budget deficit to wartime levels, the country’s fiscal watchdog has said.
The government is weighing whether Britain’s rich – who on some measures have got wealthier while many lower income citizens have suffered hardship in the crisis – should pay more to plug the gap.
Some wealth managers and economists speculate the government could look to raise money via tax hikes on savings, capital gains, Value Added Tax (VAT) or property, although the banker had not been provided with any detail on the exact policies under review.
“[The government] is reaching out. Have decisions already been made before this? I would hope not. I hope the reaching out is bona fide and there’s a willingness to listen and for dialogue and to change position if necessary,” the banker said.
Other bankers said the government was keen to encourage clients to buy government bonds or channel more equity into company startups that might otherwise struggle to find funding.
While the government engages often with the banking industry – particularly in the current crisis including over state-backed loans delivered by banks – it is unusual for officials to consult private bankers on policy matters.
A Treasury spokesman said: “The Government keeps all aspects of the tax system under review; as we exit the current crisis, we will take stock of the economy and public finances and make the right decisions at that point.”
Britons have been forced to rein in spending due to lockdown restrictions on travel, dining out and shopping.
An analysis last month by think-tank New Policy Institute found households had cut spending by £57 billion since the lockdown, with nearly half of the reduction – £23 billion – accounted for by the top fifth of households by income.
Finance minister Rishi Sunak’s next budget is scheduled for the autumn, although reports suggest some limited stimulus measures will be announced next month.
The governing Conservative Party has traditionally steered clear of fiscal policies that target wealthier Britons because of their historic backing of the party.
But with business unlikely to rebound quickly and international trade potentially stymied by Brexit, higher taxes on affluent citizens or the British assets of overseas investors are seen inevitable by some.
“I think there’s a realization that this has to be paid for and that we are probably going to have to shoulder the burden a bit more than others,” the banker said, when asked whether his clients had shared worries about tax hikes.
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