Sunak and Jeremy Hunt ‘think the unthinkable’ to fill ‘£60bn’ black hole

Raid on top earners, ‘stealth’ hikes for ordinary workers, and council tax rises: Sunak and Jeremy Hunt ‘think the unthinkable’ to fill ‘£60bn’ black hole in public finances

  • Rishi Sunak looking to raise more money from top earners to help balance books
  • Lowering threshold for top rate or even increasing it from 45p to 50p on table
  • Chancellor Jeremy Hunt will deliver the Autumn Statement to MPs next week 

A raid on top earners, ‘stealth’ hikes for ordinary workers and higher council tax is on the cards as Rishi Sunak and Jeremy Hunt scramble to balance the government’s books.

The PM and Chancellor are said to be ‘thinking the unthinkable’ as they desperately hunt for ways to fill an estimated £60billion hole in the public finances.

There is speculation the Autumn Statement next week could include drastic measures such as lowering the threshold at which people pay the top rate of tax – or even moving rate from 45p to 50p.

That would mark a return to the level imposed by Labour in 2010, smashing Tory manifesto promises, and be a dramatic turnaround from just six weeks ago when Kwasi Kwarteng announced it was being abolished altogether.

However, while final decisions are yet to be taken, government sources suggested the threshold change is more likely. According to the Treasury’s own estimates shifting to a 50p rate would only raise around £750million a year, and that would drop as top earners change their behaviour.

Eye-watering spending cuts are expected to make up the bulk of the tightening, with the mooted £25billion of tax increases overwhelmingly down to ‘stealth’ raids from not increasing thresholds in line with soaring inflation.

That drags millions of people deeper into the tax system without technically increasing taxes. Personal allowances could also be targeted for the wealthy, as well as capital gains and share dividends.  

Meanwhile, ministers are believed to be looking at freeing councils to increase tax to avoid deep cuts at a local level. 

That would mean Mr Sunak breaking another manifesto promise and removing the requirement for councils to hold a referendum if they want to raise tax over 2.99 per cent.

Rishi Sunak

Jeremy Hunt

Rishi Sunak (left) and Chancellor Jeremy Hunt (right) are said to be ‘thinking the unthinkable’ as they desperately hunt for ways to fill an estimated £60billion hole in the public finances. 

Figures compiled by the respected IFS think-tank last month showed how the freeze in tax thresholds will drag more people into the higher rate

Figures compiled by the respected IFS think-tank last month showed how the freeze in tax thresholds will drag more people into the higher rate

The Bank of England gave a grim update on the prospects for the UK economy last week 

A source said the dire situation was forcing Mr Sunak and Chancellor Jeremy Hunt to ‘think the unthinkable’.

Mr Hunt announced £32billion in tax rises within days of taking office as he sought to calm financial markets. He is now planning a further £25billion in taxes, alongside up to £35billion in cuts.

Ministers have been refusing to rule out ditching the triple lock on state pensions, increasing them in line with wages rather than the higher CPI inflation figure.

However, they are now being treated as priorities for the PM and both are expected to be uprated to match prices. The £11billion a year cost entails deeper cuts for other department.

The Chancellor is planning a raid on capital gains tax, including halving the tax-free allowance. 

And, in the biggest round of stealth taxes for years, all thresholds will be frozen for income tax, national insurance, inheritance tax and pension allowances.

A Treasury source said the package was needed to curb the soaring prices now causing havoc with household budgets.

‘The number one thing that is causing pain for millions is inflation – the hidden tax eating into pay cheques, savings and the weekly food shop. When inflation is high, interest rates increase too, pushing up the cost of mortgages and business loans. We have to wage a war on inflation.’

There are no plans to raise either the basic rate of tax or the 40p rate. 

Ministers had considered squeezing pensions and benefits by raising them in line with earnings instead of inflation. 

The move would have left payments going up by 5.5 per cent rather than 10.1 per cent and could have saved more than £5billion a year.

But Work and Pensions Secretary Mel Stride hinted heavily yesterday that the Government would try to avoid accusations of targeting the poor by ensuring pensions and benefits kept up with prices.

‘Pensioners are absolutely at the forefront of the group that we want to really protect as much as we can through these difficult times,’ he said. ‘Hard choices have to be made, but within those hard choices there is a core mission and that is to look after the most vulnerable.’

The Treasury has already warned that ‘everybody’ will have to pay more tax as a result of the decisions expected next week.

Sources said the greatest burden would fall on those with the ‘broadest shoulders’.

A senior Conservative suggested that Mr Sunak, who along with his wife is said to be worth around £730million, might be considering a hike in the top tax rate to soften criticism of his own wealth.

‘Rishi doesn’t consider anything without asking ‘how will this make me look?’ the source said. ‘A 50p tax rate will help him paint himself as no friend of the rich.’

But former Tory leader Sir Iain Duncan Smith warned: ‘It would be completely ridiculous to raise taxes further now in order to fill a notional hole in the finances in a few years’ time. 

‘All you would do is plunge us into a deeper recession and the deficit will increase even further. If we go down that route then our goose is cooked.’

Source

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