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Chancellor Rishi Sunak putting up fuel duty would be 'flashing V-signs' at ordinary voters

Putting up fuel duty in the Budget would be the equivalent of 'flashing V-signs' at ordinary voters, a senior Tory warned last night.

Chancellor Rishi Sunak is said to be considering ending the ten-year freeze on fuel duty in next month's Budget as he tries to find the cash to pay for Boris Johnson's spending pledges.

But former minister Robert Halfon yesterday warned the move risked alienating the army of former Labour voters who helped propel Mr Johnson to victory in December.

He told Sky News that pressing ahead with the move would be 'flashing multiple V-signs at working-class voters'.

'Millions of them, as the Prime Minister said, lent us their vote. I think it would probably be the shortest political loan in history.'

He added: 'We're a Conservative Government, we should be there to cut taxes for ordinary folk, not raise them.'

Chancellor Rishi Sunak is said to be considering ending the ten-year freeze on fuel duty in next month's Budget as he tries to find the cash to pay for Boris Johnson's spending pledges

Police minister Kit Malthouse also warned the Chancellor to consider the 'economic impact' on ordinary voters before signing off tax increases.

But a leading economic think tank has warned that Mr Sunak will have to use his first Budget on March 11 to put up taxes if he is to maintain the Government's rules on borrowing.

The Institute for Fiscal Studies (IFS) said loosening or abandoning the rules, set out in last year's Conservative election manifesto, would undermine the credibility of any fiscal targets the Government set.

During the election campaign, then-Chancellor Sajid Javid committed to run a balanced budget for current spending within three years.

Former minister Robert Halfon yesterday warned the move risked alienating the army of former Labour voters who helped propel Mr Johnson to victory in December

But following his dramatic resignation in the Cabinet reshuffle, Mr Sunak is reported to be under pressure from Boris Johnson and his chief adviser Dominic Cummings to loosen the spending constraints.

However the IFS said that even on current policy, borrowing next year could be £63 billion, £23 billion more than the most recent official forecast, putting the manifesto target in doubt.

With the Government committed to increasing investment spending, it said that even getting the current budget into balance would not be enough to bring down underlying debt over the course of the parliament.

Loosening or abandoning the current fiscal rule now would put debt on a clearly rising path.

Mr Sunak is reported to be under pressure from Boris Johnson and his chief adviser Dominic Cummings to loosen the spending constraints

'That would not be sustainable in the long term,' the IFS analysis warned.

The Conservative election manifesto also committed the Government not to put up income tax, national insurance or VAT.

However, among the alternative ways for raising revenue, the IFS said abolishing entrepreneurs' relief in capital gains tax and increasing council tax for those living in more expensive properties could form part of a 'desirable package' of reforms.

It said that in 2017-18 alone, three quarters of the £2.3 billion cost of entrepreneurs' relief went to just 5,000 individuals with an average tax saving of £350,000 each.

At the same time, the IFS said restricting pensions tax relief to the basic rate would bring in more than £11 billion, although it suggested there were better ways of reform.

It also pointed out that continuing to freeze fuel duty would cost the Treasury £4 billion by the end of the current parliament.

IFS director Paul Johnson said Mr Sunak's first Budget would now set the direction of Government policy for the next five years.

'If this new Government is going to make radical change to taxes and spending this surely is the time to do it,' he said.

'The Chancellor is hemmed in by a rising deficit and fiscal targets set out in the Conservative manifesto.

'They will allow him to increase investment spending, which will be welcome if well targeted. But they will not allow substantial increases in current spending, or tax cuts, to be funded by more borrowing.

'We have already had 16 fiscal targets in a decade, and fiscal targets should not just be for Christmas. Mr Sunak should resist the temptation to announce another and instead recognise that more spending must require more tax.'