Hunt faces potential Tory backlash as he draws up plans to raise £50bn
There are growing government fears about a potential Tory backlash against Jeremy Hunt’s fiscal statement as he looks to find ways to raise £50bn.
Hunt will raise taxes and cut future real-terms spending in his 17 November autumn statement, with the chancellor looking at proposals to freeze Income Tax thresholds as a part of a stealth tax grab.
He is considering plans to hike Capital Gains Tax and dividends taxes, while also clamping down on non-doms.
Prime Minister Rishi Sunak refused to rule out breaking the Tories’ so-called tax triple lock from the 2019 election – a promise not to hike headline rates of Income Tax, National Insurance or VAT – during an interview with The Times on Saturday.
Hunt and Sunak will also have to take a decision on whether to keep the pensions triple lock and increase the state pension by inflation next year.
Ditching the pensions triple lock would be a politically difficult decision, considering the Tories’ electoral base, and would likely spark a large backlash from backbench MPs.
Some Tory MPs – including Maria Caulfield and Steve Double – have recently said they would not vote to break the pensions triple lock.
A Treasury source told The Sunday Times that Hunt’s available choices were “politically impossible”.
Cabinet Office minister Oliver Dowden today told Sky News “we are going to have to take difficult decisions on both tax and spending”.
“We need to bear down on spending first and eliminate waste, excessive spending and only go to tax rises if it’s the last resort but given the difficult of the public finances, there is likely to be a mix of the two,” he said.
The government is looking to slash government borrowing, after Covid and a series of energy price freezes blew out the UK’s debt pile by hundreds of billions.
September’s mini-Budget, which has now been almost entirely reversed, also led to a surge in government borrowing costs as long-term bond yields soared amid a deep sell-off.
Mayor of London Sadiq Khan has warned Sunak against imposing “austerity 2.0” against London and today called on the Hunt to announce funding for Crossrail 2 – a new North-South underground line.