Tax increases are in store for individuals and businesses in the United Kingdom in 2022 when the country starts paying for the massive stimulus packages that warded-off the worst of COVID-19's economic damage.
Keeping the badly dented British economy afloat in 2020 saw the public debt balloon to $2.97 trillion (£2.115 trillion), or 97.9% of gross domestic product, which is a massive percentage not seen since the early 1960s.
In 2020, the British government spent at least $393 billion (£280 billion) on measures to fight COVID-19 and the immense harm it inflicted on the economy. This staggering sum includes $102 billion (£73 billion) for measures to support jobs.
Among these measures is the furlough scheme in which the government paid most of the wages of employees unable to work. In addition, $93 billion was spent on grants and loans to support businesses. The National Health Service and other public services were given an extra $178 billion to combat the pandemic
A number of British economists expect higher taxes to be levied much sooner than expected. The Institute for Fiscal Studies, an economic research institute based in London, warned tax increases of more than $56 billion a year are "all but inevitable."
"Big tax rises eventually will have to be announced, with 2022 likely to be the worst year, so that they will be far from voters' minds by the time of the next general election in May 2024," according to Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics, an economic research consultancy based in England.
The bill is bound to be higher as Chancellor of the Exchequer Rishi Sunak is expected to extend a costly wage subsidy program for the hardest-hit sectors. Sunak also said the time will come when the UK will have to pay the piper.
"It's right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I'll always be honest with the British people about how we will do this," he said.
The inconvenient truth facing British taxpayers is there will still be higher costs and lower tax receipts in future years too, which means more borrowing, when the pandemic begins to wane.
Some economists argue all the costs of the crisis can be covered by borrowing alone, but many others disagree citing the enormous expenses involved.
The only alternative for the British government not borrowing money is to raise taxes and slash spending -- or both -- which is the likely route the government of Prime Minister Boris Johnson will take.
Raising taxes will be politically volatile for Johnson because the Conservative 2019 manifesto promised not to raise the three biggest taxes: the income tax, national insurance and VAT.
Unfortunately, there three taxes combined account for more than half of government revenues. Raising taxes will also see Britons spending less, which in turn will slow down the economy even further.
