Categories: Economy

Chancellor Jeremy Hunt ready for stealth tax raid to harvest £68bn

Jeremy Hunt ready for stealth tax raid to raise £68bn: Households hit in the face as Chancellor tries to plug hole in country’s finances

  • Chasing pressure to reassure markets he can balance government books
  • He has warned that ‘dazzlingly difficult’ decisions will be required
  • Choices will be tough as bank predicts longest recession ever

Under pressure: Chancellor Jeremy Hunt

The chancellor is set to unleash £68bn in stealth taxes this week in a desperate bid to plug a huge hole in the country’s finances.

Jeremy Hunt – who was appointed to the position just a month ago – is under pressure to reassure markets that he can balance government books after a disastrous budget statement from his predecessor.

Kwasi Kwarteng and former Prime Minister Liz Truss both resigned after their package of unfunded tax cuts deterred investors and pushed government debt interest rates higher.

Hunt has warned that “dazzlingly difficult” decisions will be needed to restore Britain’s economic credibility. The choices will be particularly difficult as the Bank of England predicts the longest recession on record.

Whitehall sources said the planned freeze of several tax thresholds will do much of the “heavy lifting.” But the series of measures will undoubtedly hurt households. By far the biggest money guzzler for the Treasury will extend a planned freeze on income tax brackets by two years. This will bring in a total of £52.5 billion by 2028, according to think tank the Center for Economic and Business Research (CEBR).

The move means three million more low-paid and middle-income earners will be dragged into higher tax brackets as their wages rise. Wages are rising faster than normal due to double-digit inflation.

Tax brackets are designed to rise with prices to ensure that no one pays more taxes simply because of inflation. But earlier this year – when he was chancellor – Prime Minister Rishi Sunak froze the amount at which people start paying taxes to £12,570.

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He also set the threshold for the 40 per cent higher rate at £50,271. Before the expected two-year extension to be announced by Hunt, the thresholds would remain the same until 2026.

The move was announced before prices started to rise and would initially cost taxpayers £8bn. But with inflation over 10 percent, the total has risen significantly.

Expanding other stealth loads will add to the total – albeit much smaller amounts. According to the CEBR, freezing inheritance tax thresholds in 2027/28 would result in a stealth tax robbery of £11.8 billion over the next five years. Keeping the lifetime benefit for retirement savings at £1,073,100 over the next five years would bring in another £3.2 billion, the think tank added.

Government officials warn that any significant drop in inflation could result in the Treasury getting far less than expected from stealth taxes. The uncertainty has forced Hunt. He is said to be planning other major tax hikes, including an extension of the windfall tax on oil and gas giants, including BP and Shell.

The Mail on Sunday understands that the levy can rise from 25 percent to 35 percent, and can also be extended for another two years. Electricity generators can also be targeted. The measures could generate £45 billion in five years. But that amount could fall due to the volatility in the gas market.

Whitehall sources said the £150,000 threshold for those paying the top 45p income tax rate could be lowered.

Banks are in the firing line and the triple lock guaranteeing pension increases is under review. However, the bulk of Hunt’s budget package will consist of cuts in government spending – in an effort dubbed as Austerity 2.0.

The Mail on Sunday understands that austerity measures could be as much as £35bn a year, while tax increases could be as much as £25bn.

Last night, experts said major cuts in government spending would not sit well with investors. “Financial markets don’t really believe it’s politically feasible,” warned Jonathan Portes, an economics professor at King’s College f. “There is a big medium to long-term gap between what the UK raises in taxes and what the UK public wants in terms of spending on public services. That needs to be addressed.’

Jacky

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