Rishi Sunak has been drawing up plans for years of tax increases for everyone in the country, as a Treasury source warned: “It will be tough.”
On Monday, the Prime Minister and the Chancellor decided to introduce “invisible” increases in income tax and social security in the coming years, freezing the thresholds at which people start paying different rates.
They agreed that “tough decisions” on tax increases would be needed, given the “staggering size” of the £ 50 billion fiscal black hole left by Liz Truss’s disastrous mini-budget.
Jeremy Hunt is believed to be trying to save money in a relationship between tax increases of 50% and spending cuts of 50%, indicating that tax increases of £ 25 billion could be expected.
At Monday’s meeting to plan this month’s long-awaited Autumn Declaration, Mr. Sunak and Mr. Hunt allegedly ruled out the increase in income tax, national insurance and VAT rates, as this would violate the 2019 conservative manifesto.
Income tax and social security thresholds were already expected to be frozen until 2026, but the new plan calls for an extension of two years or more.
But the decision not to touch the top three tax rates – plus the fact that freezing thresholds only save £ 5 billion a year – raises the prospect that a slew of other taxes may need to be raised across the board. to raise billions of extra pounds.
Public sector pay may also be targeted by the Treasury, which is reportedly trying to offer workers a 2% increase across the board.
Such an increase is likely to fuel further strike threats from union leaders demanding an inflation-matched 10% increase for members, including NHS staff and teachers.
A source told the Times that Whitehall departments would be briefed on the “planning assumptions” on Tuesday.
The Treasury said on Monday that while those with broader shoulders would have to bear the brunt, it is “inevitable” that everyone will have to contribute more in taxes in the years to come given the “enormity” of the challenge.
“It will be tough,” the source said. “The truth is that everyone will have to contribute more in taxes if we are to maintain public services.
“After borrowing hundreds of billions of pounds from Covid-19 and implementing massive support for energy bills, we won’t be able to fill the fiscal black hole with spending cuts alone.”
The source said the couple reaffirmed their commitment to continue to protect the most vulnerable during what will be a “difficult time”.
Government insiders believe that more billions are needed to fund the NHS, to clear the Covid backlog that has led to record-breaking waiting lists. With no money left, waiting lists are feared to peak much later than the currently expected date of March 2024.
The Treasury’s warning came as Suella Braverman was fighting for her political life in the House of Commons.
The Interior Minister said she was the victim of a “witch hunt” and denied claims she ignored legal advice or blocked plans to use hotels to address chronic overcrowding at the main processing center of the hotel. asylum for Channel Migrants at the disused Manston Airport in Kent.
He insisted that it was “virtually impossible” to host all migrants, as he claimed that “illegal immigration was out of control” and that the southern coast has faced an “invasion” – with 40,000 migrants arriving so far this. year at twice the rate of 2021 “Let’s stop pretending that they are all refugees in danger,” he said.
It came on the same day that Ms. Braverman admitted sending official documents to her personal email on six occasions while she was Minister of the Interior, as she posted her version of the events leading up to her resignation for breach of the law. ministerial code.
While Ms. Braverman was speaking, the Treasury took the unusual step of intervening to warn that spending cuts alone would not be enough to raise the tens of billions needed to settle the score.
The tax changes will be included in the Autumn Declaration, which will be unveiled on November 17, which will define tax and spending decisions for the next five years. It is considered probable that any changes will occur at the beginning of the next financial year.
John O’Connell, chief executive of the TaxPayers’ Alliance, said: “Taxpayers will be horrified to talk about larger bills coming up.
“With the tax burden peaking at 70 years, the British are expected to bear the brunt of a staggering cost of the government crisis. The Chancellor must make significant savings to ease the pressure on families in need. “
NHS England has warned that it faces a massive budget deficit as inflation is much higher than expected.
However, on Monday, it emerged that a NHS diversity initiative will cost taxpayers more than £ 700,000 in jobs advertised this month alone.
In October, 16 roles were advertised in various NHS trusts across the country, all focusing on diversity, equality, inclusion and well-being.
The spending comes in the midst of a growing crisis across the health service, with seven million now on a waiting list and operations canceled for lack of blood.