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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.
On Monday, the Treasury said that while those with the broadest shoulders should bear the greatest burden, it is “inevitable” that everybody would need to contribute more in tax in the years ahead given the “enormity” of the challenge.
“It is going to be rough,” said the source. “The truth is that everybody will need to contribute more in tax if we are to maintain public services.
“After borrowing hundreds of billions of pounds through Covid-19 and implementing massive energy bills support, we won’t be able to fill the fiscal black hole through spending cuts alone.”
The source said that the pair had reiterated their commitment to continuing to protect the most vulnerable during what will be a “difficult period”.
Government insiders believe billions more are needed to fund the NHS, to clear the Covid backlog that has led to record waiting lists. It is feared that without more money, waiting lists will peak much later than the currently expected date of March 2024.
The warning from the Treasury came as Suella Braverman was fighting for her political life in the House of Commons.
The Home Secretary claimed she was the victim of a “witch-hunt” and denied claims she had ignored legal advice or blocked plans to use hotels to tackle chronic overcrowding at the main asylum processing centre for Channel migrants at the disused Manston airfield, in Kent.
She insisted it was “practically impossible” to house all the migrants, as she said “illegal immigration was out of control” and that the south coast faced an “invasion” – with 40,000 migrants arriving so far this year at double the rate of 2021. “Let’s all stop pretending that they are all refugees in distress,” she said.
It came on the same day as Mrs Braverman admitted she had sent official documents to her personal email on six occasions while Home Secretary, as she published her version of events leading up to her resignation for breaching the Ministerial Code.
As Mrs 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 balance the books.
The tax changes will be included in the Autumn Statement, to be unveiled on Nov 17, which will set out tax and spending decisions over the next five years. It is considered likely that any changes would come in at the start of the next financial year.
John O’Connell, chief executive of the TaxPayers’ Alliance, said: “Taxpayers will be horrified by talk of bigger bills to come.
“With the tax burden at a 70-year high, Brits are being expected to bear the brunt of a spiralling cost of government crisis. The Chancellor must make significant savings to ease the strain on hard-pressed households.”
NHS England has warned that it faces a massive budget shortfall because inflation is so much higher than expected.
However, on Monday, it emerged that an NHS diversity drive will cost taxpayers more than £700,000 in jobs advertised in this month alone.
There were 16 roles advertised at various NHS trusts across the country throughout October, all which have a focus on diversity, equality, inclusion and wellbeing.
The spending comes amid a mounting crisis across the health service, with seven million now on waiting lists and operations being cancelled amid shortages of blood.
Source:Daily Telegraph