Rishi Sunak is preparing years of tax rises for Britain in an effort to make up for a £50bn fiscal hole left by Liz Truss’s disastrous tenure in Downing Street, according to a Treasury insider.
After a meeting between the prime minister and Jeremy Hunt on Monday to plan the upcoming autumn statement, a Treasury source said things were going to get “rough”.
Both Sunak and his chancellor reportedly agreed that “tough decisions” need to be undertaken due to the “eye-watering” size of the blow to public finances dealt by Truss’s mini-budget.
“Stealth” increases in income tax and national insurance contributions are expected to be rolled out over the next few years by extending a freeze on personal tax allowances and thresholds.
“It is going to be rough,” the source said. “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.”
Hunt is reportedly looking to implement an equal split of 50% tax rises and 50% spending cuts, which could translate into £25bn in hikes for taxpayers. During the austerity years of the coalition government, the then chancellor George Osborne worked from a formula of 80/20 cuts and tax measures.
Despite the difficult road ahead, the source indicated that Sunak and Hunt expressed their commitment to protecting those most vulnerable and agreed that “those with the broadest shoulders should be asked to bear the greatest burden”.
The chancellor is expected to deliver the autumn statement on 17 November, after No 10 delayed the announcement from its initial Halloween date.
Public services in the UK are already facing fiscal pressure, with councils slashing services to try to meet a £3.2bn budget shortfall next year.
While the economic forecast is looking cloudy for taxpayers, Sunak has enjoyed a positive reception among voters in terms of financial planning.
The latest Opinium poll for the Observer revealed Sunak’s tenure is already improving the Conservatives’ reputation for financial management, taking the lead over Labour.
A third of voters said they would prefer “a Conservative government led by Rishi Sunak” to manage the economy, with 29% choosing “a Labour government led by Keir Starmer”.