UK workers are prepared to pay 3.9% more income tax to fill a £298.4bn hole in Britain’s public finances triggered by the coronavirus crisis, according to new research.
More than three-quarters (77%) of Brits are willing to pay extra income tax to fund the COVID-19 response, according to research by investment platform AJ Bell and pollsters Opinium.
Almost a fifth (19%) would happily pay an extra 5% or more in income tax to help fill a budget deficit in 2021-21 estimated at £300bn by the Office for National Statistics. The government’s spending has soared on measures to save firms and jobs and support public services and households, while tax receipts have plummeted.
The UK government has been able to borrow at record-low interest rates to fund its crisis support, but some economists have warned it will eventually have to take steps towards balancing the budget to keep debt levels sustainable.
Some 63% of respondents said they accepted tax increases as a “necessary evil” arising from the unprecedented pandemic and lockdown. Most Brits (85%) would rather pay lower amounts of tax over a longer period of time, than large amounts over a shorter period of time.
However, 23% of UK workers said they would not accept any rise in income tax. The majority (69%) agreed the government had been right to borrow more to get the UK through the pandemic, with two-thirds (67%) agreeing that everyone had a responsibility to contribute.
Tom Selby, a senior analyst at AJ Bell, said: “While policymakers will need to be careful not to stifle an economic recovery by hiking income tax rates too much, there appears to be general acceptance that the COVID-19 costs will need to be repaid and that tax rises are therefore a necessary evil.
“Given battling this pandemic has required a collective effort, it would make sense for all of us to help foot the bill. Indeed, this may be one of the few times in history where a government could hike income tax — perhaps via a time-limited COVID-19 surcharge — without necessarily wrecking their election chances.”
Asked about what form tax reforms could take, the most popular proposal was increasing dividend tax and capital gains tax, with 37% supporting it. A third (33%) thought rises in income tax were the most acceptable, just over a fifth (22%) believe inheritance tax should be the way to fill the hole, and 21% backed a National Insurance increase.
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Changes to pensions proved less popular, with removing the state pension triple-lock (10%) and restricting pension tax relief (9%) the least favoured.
“Although most people accept the Treasury will need to raise funds via the tax system to pay for COVID-19, there is significant disparity in the appeal of various different measures,” said Selby. “However, when it comes to pensions the public is sending a clear ‘hands off’ message to the chancellor.”