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Sunak dismisses tax cuts as he says COVID recovery 'comes at a cost'

·3-min read
Rishi Sunak
Britain's Chancellor of the Exchequer Rishi Sunak delivers a speech during the annual Conservative party conference, in Manchester, Britain. Photo: Toby Melville/Reuters

UK chancellor Rishi Sunak on Monday committed more than £500m ($677m) in fresh funding to getting people back to work, as the end of the furlough scheme threatens a cliff-edge for the employment market in the UK. 

Speaking at the Conservative party conference in Manchester, he said that following mass public spending for COVID: "Our recovery comes with a cost."

Sunak stressed that he knows tax rises are "unpopular," but that public finances must be put back on "sustainable footing". He said there was no "magic wand" to get the balance sheet back on track, dismissing the call from some Conservatives for tax cuts.

He also announced 2,000 AI scholarships for young people and said the number of Turing research fellows would be doubled. 

He said AI would bring a £200m a year benefit to the UK economy.

Sunak hailed the new age of technological progress. "We are a global leader in AI. And AI has the potential to transform the whole society," he said.

Watch: Conservative Party conference 2021: Chancellor Rishi Sunak defends tax rises and stresses 'need to fix public finances'

Speaking on Brexit he said he believes it is in the "long-term" interests of the UK and that despite the challenges it has brought, it will lead to a "culture of enterprise". 

Following attempts to shield the employment market from the pandemic, the chancellor's focus seemed to be to get people into new or better jobs, as the government faces mounting pressure on standards of living. 

The furlough scheme cost the government nearly £14bn a month, protecting nearly 12 million jobs and supporting more than 1.3 million businesses.

In a low interest rate environment, and amid mounting inflationary pressures, the cost of living has gone up in the UK. Meanwhile, the government has deemed keeping the £20 uplift to universal credit "no longer appropriate". The increase in benefits was a measure introduced to help people through the pandemic.

Read more: What the end of the stamp duty holiday means for the housing market

The chancellor had earlier refused to rule out future tax hikes, defying members of the Conservative party that are against a higher tax burden.

Earlier in September, Sunak and the prime minister hiked national insurance by 1.25 percentage points — a move that kicks in in April next year and is set to impact the earnings of swathes of working-age people. 

Before his speech on Monday, Sunak told Sky News he would not “pre-empt” the local government finance settlement later in the year and added to LBC he “never can comment about future tax policy”.

In answer to some questions on the HGV driver shortage, which has brought supply chains to a standstill in the UK, he said "pragmatic controlled immigration" could be part of the short-term solution.

Watch: What is inflation and why is it important?

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