Rishi Sunak is drawing up plans for years of tax rises for everyone in the country, as a Treasury source warned: “It’s going to be rough.”
On Monday, the Prime Minister and the Chancellor decided to bring in “stealth” increases in income tax and National Insurance over the coming years by freezing the thresholds at which people start to pay different rates.
They agreed that “tough decisions” would be needed on tax rises, given the “eye-watering size” of the £50 billion fiscal black hole left by Liz Truss’s disastrous mini-Budget.
It is believed Jeremy Hunt is looking at saving money in a ratio of 50 per cent tax rises and 50 per cent spending cuts – indicating that £25 billion of tax rises could be on the cards.
At Monday’s meeting to plan this month’s much-anticipated Autumn Statement, Mr Sunak and Mr Hunt are understood to have ruled out increasing the rates of income tax, National Insurance and VAT, as to do so would breach the Conservatives’ 2019 manifesto.
It was already expected that income tax and National Insurance thresholds would be frozen until 2026, but the new plan sees this being extended for two years or even longer.
But the decision not to touch the rates of the three main taxes – on top of the fact that freezing thresholds only saves £5 billion a year – raises the prospect that a slew of other taxes may have to be increased across the board to raise billions of pounds more.
Public sector pay could also be targeted by the Treasury, which is reportedly looking at offering workers a 2 per cent rise across the board.
Such an increase is likely to fuel further threats of strike action from union bosses who are demanding an inflation-matching 10 per cent rise for members including NHS staff and teachers.
A source told The Times that Whitehall departments would be told of the “planning assumptions” on Tuesday.
