Millions of households face a financial double whammy consisting of a £900 average rise in their energy bills next year along with possible increases in council tax under plans to be unveiled in this week’s Budget.
Whitehall sources told the Daily Mail that Chancellor Jeremy Hunt is poised to slash Government subsidies and allow average annual bills to reach £3,000 from April.
The new level is £500 above the current £2,500 energy price ‘guarantee’ set out by Liz Truss, which was originally supposed to last for two years, and almost treble the £1,042 average in April 2020.
Sources told the Mail that a £400 one-off payment reducing bills for all households this winter will not be repeated, leaving millions facing an average rise of £900 in total – an extra £75 per month.
Mr Hunt, who dubbed himself ‘Scrooge’ yesterday, said universal support would continue to help families next year but added ‘there has to be some constraint’ before warning that ‘sacrifices’ were required across the board to get the economy back on track.
The impending economic turmoil facing millions of Brits is only set to be compounded by Government plans to allow local authorities to increase council tax. The inclusion of such proposals in Thursday’s Budget has not yet been confirmed but is said to be ‘more likely than not’, according to The Times, in an attempt to pay for social care.
Meanwhile, the Chancellor is also said to be planning to cut education spending – an ‘indefensible’ move which saw 28 Conservative MPs sign a letter claiming that it ‘would not be morally right’ in the wake of school closures amid the pandemic.
The planned measures are all in the name of ‘putting our public finances on a sustainable trajectory,’ according to Prime Minister Rishi Sunak, after investors were spooked by his predecessor’s £45 billion tax-cutting bonanza.
Whitehall sources have told the Daily Mail that Chancellor Jeremy Hunt is poised to slash Government subsidies and allow average annual bills to reach £3,000 from April next year
Sources told the Mail that a £400 one-off payment reducing bills for all households this winter will not be repeated (stock picture)
The UK economy shrank by 0.2 per cent in the second quarter of the year, according to the ONS
Chancellor Jeremy Hunt is on the hunt for tax as the 45p tax rate set to kick in from earners making £125,000
Tax rises ‘could choke growth’
Massive tax rises planned by Chancellor Jeremy Hunt could ‘choke off growth’ and trigger a deeper recession, a former Cabinet minister warned yesterday.
Simon Clarke, who was Levelling Up Secretary in Liz Truss’s government, urged ministers to focus on spending cuts rather than tax rises as they scramble to balance the books ahead of Thursday’s Budget.
Mr Clarke, who also served as Rishi Sunak’s deputy during his time at the Treasury, told Sky News: ‘I believe very strongly that with the tax burden at a 70-year high, we need to be extremely careful about further increasing the challenges facing businesses and households.’
Sources said the Budget was likely to comprise around £33billion in spending cuts and £21billion in tax rises, on top of the £32billion in tax increases announced by Mr Hunt last month.
One source acknowledged families would face a painful rise in energy costs next April but said that continuing government support would stop bills reaching their forecast level of around £4,000 next year.
‘It is going to be tough, but it will be £1,000 less than if we did nothing,’ they said.
Mr Hunt indicated yesterday that additional support is likely to be targeted at the ‘most vulnerable’, including pensioners and those on benefits.
The reduction in energy support comes as ministers scramble to close a £54billion ‘hole’ in the public finances.
The Chancellor said we were ‘all going to be paying a bit more tax’ and warned ‘sacrifices’ would be needed to restore order to the Government’s books.
He said Thursday’s Budget would see him act as ‘Scrooge’ but that action to restore the public finances was needed now to protect the economy for future Christmases.
He added: ‘I hope people understand that there’s going to be some horrible decisions in order to get us back into the place where we are the fantastic country we all want to be.’
Mr Hunt said the UK’s energy costs were set to soar from £40billion in 2019 to an astonishing £190billion this year as a result of the war in Ukraine.
He said the cost rise was the equivalent of the NHS budget – and warned it was not ‘sustainable’ for the taxpayer to cover the entire cost.
‘We have to be honest with people – it’s not possible to subsidise people’s energy bills indefinitely,’ he added.
Wallace talks tough on defence
Defence Secretary Ben Wallace has not ruled out resigning if military funding is cut or frozen.
The defence budget is expected to rise from £47.9billion this year to £48billion in 2023 and £48.6billion in 2024 but inflation rises means there will be a real-terms spending cut.
Last week Mr Wallace said he was ‘determined’ to ‘fight every bit of the way’ to ensure defence spending reaches 3 per cent of GDP by 2028. Asked yesterday if he would resign if the Autumn Statement fails to deliver, he said: ‘I’ve had good discussions with the Treasury… let’s see what is served up.’ But he also defended Jeremy Hunt, suggesting he had a ‘very difficult job’.
However, former Cabinet minister Simon Clarke tweeted: ‘The one area where I truly believe we would be making a false saving by instigating cuts would be defence.’
‘In the end, if we want to be a low-tax economy we’ve got to find a way of not ending up with an entire second NHS in terms of the cost.’
The energy price guarantee was unveiled by Miss Truss in September in response to soaring energy costs.
The two-year plan was meant to cap energy prices at a level that would result in average bills of £2,500.
But, with costs estimated at £10billion a month, Mr Hunt moved quickly to cut the duration of the scheme to just six months when he succeeded Kwasi Kwarteng at the Treasury last month.
He and Rishi Sunak considered scrapping the universal subsidy altogether.
But with unconstrained average bills forecast to hit £4,000 next April, they concluded that too many families on middle and low incomes would face extreme poverty without further support.
Mr Hunt said universal energy support would also help keep inflation lower than it would otherwise be.
Speaking during a round of media interviews yesterday, he said: ‘We don’t want anyone not to be able to afford to heat their home over this winter or indeed future winters.
‘But in the long run, what you need is a plan that means we don’t need to have to give very, very expensive support as taxpayers.’
The Chancellor also said the Government would come forward with a ‘proper’ energy plan.
However, it is thought the Budget will also include proposals to allow local authorities to charge more council tax, as Hunt looks for ways to ease pressures on social care.
The chancellor is understood to back increasing the amount that local authorities are able to increase bills each year to pay for care home places and home help, according to The Times.
The move — which would effectively amount to another tax rise above those already planned — would be highly controversial and could fly in the face of the Conservative Party manifesto which in 2019 pledged to keep the ‘veto’ on large council tax rises.
‘We’re all going to be paying a bit more tax, I’m afraid’: Jeremy ‘Scrooge’ Hunt warns he will make ‘horrible’ decisions in Autumn Statement to stabilise economy but hints NHS spending is safe – as Tory MPs warn he faces a ‘Pasty Tax’ style revolt
David Wilcock, deputy political editor for MailOnline and Glen Owen, political editor and Francesca Washtell, deputy city editor for the Mail On Sunday
Jeremy Hunt warned Britons they are ‘all going to be paying a bit more tax’ after Thursday as he tries to rescue to the economy.
The Chancellor continued to roll the pitch for Thursday’s Autumn Statement which is expected to hammer families and cut public spending.
It came after he warned he will take’ horrible’ decisions this week, and branded himself as a ‘Scrooge’ trying to save family Christmases.
The Chancellor warned that Thursday’s Autumn Statement would be a ‘rabbit-free budget’ containing no sugar to coat the bitter taste of his fiscal medicine to cure a £60billion hole in the economy.
He is expected to reveal a raft of unpopular measures that will hit families across the UK, including freezing income tax thresholds until 2028, a move some have claimed is a ‘stealth tax’ because wage inflation will drag many more people into higher rate bands.
Asked on Sky News’ Ridge on Sunday if he would be paying more tax as a high earner, he replied: ‘We are all going to be paying a bit more tax, I’m afraid … but it’s not just going to be bad news.
‘I think what people recognise is that if you want to give people confidence about the future, you have to be honest about the present. And you have to have a plan.
‘This will be a plan to help bring down inflation, help control high energy prices and also get our way back to growing healthily, which is what we need so much.’
Asked if there would be a return to austerity he said there are going to be ‘very difficult decisions’.
But he also hinted that NHS funding could be safe from cross-government cuts. He said the under-pressure health service was ‘part of the solution’ to getting the economy back to growth by reducing the number of people off on long-term sick leave.
But Mr Hunt was today warned that he faces a Tory backbench revolt like that seen in 2012 over the ‘pasty tax’ when he tries to get his tax rises and spending cuts through Parliament.
One told the Telegraph: ‘If I shut my eyes I don’t see any difference between Hunt, [Sir Keir] Starmer, Sunak and [Rachel] Reeves, frankly.’
And Simon Clarke, who was a cabinet minister under Liz Truss, said he should concentrate on spending cuts because taxes were already high enough.
The UK economy shrank by 0.2 per cent in the second quarter of the year, according to the ONS
Chancellor Jeremy Hunt is on the hunt for tax as the 45p tax rate set to kick in from earners making £125,000
PM Rishi Sunak and Jeremy Hunt are in the process of finalising plans for the Budget amid rising inflation
Hunt to unveil energy bill plan on Thursday
Chancellor Jeremy Hunt has said he will announce the plan for energy bills from April in the budget on Thursday.
Without going into detail, he said people will continue to receive support, but that there will be ‘some constraints’ to this.
‘Will it be uncapped, unlimited? We have to recognise that one of the reasons for the instability that followed the mini-budget was that people were worried that we were exposing British public finances to the volatility of the international gas market,’ he told the BBC’s Sunday with Laura Kuenssberg.
‘So, there has to be some constraints to it.
‘But, yes, we will continue to support families and I will explain exactly how we’re going to do that.’
He said it is important to focus on bringing down the price of energy in the long term.
Asked if the average family could again be facing bills of up to £4,000 in the spring, he told the BBC: ‘I will explain the support we’re giving (on Thursday).
‘I think it’s very important that we do support energy bills.’
He said it was ‘the right thing to do’ for Liz Truss and Kwasi Kwarteng to bring in a new price guarantee, but stressed help must be offered on a ‘sustainable basis’.
Mr Hunt said a ‘proper energy policy’ is not just about ‘short-term support’.
‘It’s also about showing people credibly – and I stress the word credibly – that we have a plan that means that we can bring down the price of energy on a long-term basis,’ he said.
Mr Clarke told Sky: ‘It’s absolutely right we balance the books.
‘I would urge Jeremy to make sure we do as much as we can from spending reductions as opposed to tax increases, noting tax is at a very high level and faced with the recession risk.’
He added that he still supported Ms Truss’ pro-growth agenda but said he believed she had been going to release a spending review at the same time as her mini-budget, and it was his ‘lasting regret’ that she had not done so.
Mr Hunt had earlier said he would focus on delivering ‘certainty’ to families and businesses in the wake of the market turmoil sparked by his predecessor’s £45 billion tax-cutting bonanza.
Mr Hunt has abandoned plans to reinstate Labour’s 50p top tax rate – but will still hammer higher earners by reducing the income level at which the top 45p rate kicks in from £150,000 to £125,000.
There is also expected to be a hike in the windfall tax on oil and gas giants from 25 to 35 per cent, cutting the tax-free allowance for share dividends and dropping the requirement for councils to hold a referendum on tax increases above 2.99 per cent.
Cutting the threshold for the top rate of tax, and freezing income tax thresholds for two more years until 2027/28, will raise billions of extra pounds while technically sticking to the Tories’ 2019 manifesto pledge not to increase income tax, national insurance or VAT.
The Chancellor told the Sunday Times: ‘I’m Scrooge who’s going to do things that make sure Christmas is never cancelled.
‘But I hope that people will understand that there’s going to be some very horrible decisions in order to get us back into the place where we are the fantastic country that we all want to be.’
Shadow chancellor Rachel Reeves called on Jeremy Hunt to make ‘fair choices’ when he reveals the autumn budget on Thursday and not to put the whole burden on ‘ordinary working people’.
She told Sky News’s Sophy Ridge On Sunday programme that Rishi Sunak had ‘slow-pedalled’ on the windfall tax when he was chancellor.
Ms Reeves said: ‘I’ve been banging on about the windfall tax on big energy companies since the beginning of this year.
‘The Prime Minister when he was chancellor slow-pedalled on that. We still think you could raise an additional £50 billion through extending the windfall tax by two years, by backdating it to the beginning of January when those windfalls, those profits of war, started coming onto the balance sheets of the energy companies.
Train Brits to do jobs given to foreign workers, says Starmer
Sir Keir Starmer has said the labour shortage in the UK cannot be remedied with foreign workers but by training Britons.
The Labour leader said: ‘We can’t rely on bringing in talent from abroad.’
In a wide-ranging interview with the Sunday Express which covered Brexit, the migrant crisis and the possible return of Jeremy Corbyn, Sir Keir declared Labour is a ‘changed party’.
He added: ‘We have turned the party inside out.’
According to the newspaper, Sir Keir revealed he supports a points-based immigration system so qualified people can come to the UK when there is a specific shortage of skilled workers.
On the topic of Brexit, he said there is no ‘going back’.
He told the Express: ‘Let me clear about Brexit. There is no case for going back into the single market or customs union. Freedom of movement is over. There will be no return to that, either.
‘What we want to do is make Brexit work.’
He went on say it is ‘very difficult to see the circumstances in which’ Mr Corbyn would return as an MP for his party.
‘By getting rid of some of the loopholes that mean companies like Shell are not even paying any of the Government’s energy profits levy and extending it to some of the electricity generators.
‘So, there are fair choices that the Chancellor could be making this week, rather than just putting all of that burden on ordinary working people who are already struggling with the highest inflation that any of us have experienced for 40 years and now risk more of their money going in taxes, rather than having it for the weekly food shop, the higher mortgage payments and everything else that is facing people right now.’
Moving the 45p rate to incomes of £125,000 and above will raise just £1.3 billion a year but will allow Premier Rishi Sunak to ‘detoxify’ the Government in the wake of Liz Truss’s disastrous attempt to cut the top rate to 40p – one of the measures in Kwasi Kwarteng’s mini-Budget which spooked the markets and handed political ammunition to Labour.
But many Tory MPs fear that Mr Sunak is ‘over-correcting’ and jeopardising the Conservatives’ reputation as a low-tax party.
Mr Sunak and Mr Hunt met on Friday to finalise plans for the Budget, which comes after the Office for National Statistics said the UK economy shrank by 0.2 per cent in the third quarter of 2022.
Their stealth taxes will add up to £68 billion, according to think-tank the Centre for Economic and Business Research. Extending the freeze on income tax bands for an extra two years will net £52.5 billion by 2028.
It means three million more low-paid and middle-income earners will be dragged into higher tax brackets as their wages increase – because pay is rising faster due to double-digit inflation.
Earlier this year, when he was Chancellor, Mr Sunak froze the amount at which people begin paying tax at £12,570 and pegged the threshold for the 40 per cent higher rate at £50,271, where they will now remain until 2026.
Freezing inheritance tax thresholds into 2027/28 would result in an £11.8 billion stealth tax grab over the next five years. Keeping the lifetime allowance on pension savings at £1,073,100 for the next five years would net a further £3.2 billion.
Reducing the 45p threshold will drag nearly 250,000 people into paying the highest rate of income tax, costing them £580 a year, while a further 629,000 people who are already paying the 45p tax will fork out £1,250 more a year.
Bank of England data predicts that unemployment will rise markedly, seeing around 1milion more people out of work
The ONS estimate for the third quarter was not quite as bad as the Bank of England’s forecasts last week implied – although it will be subject to revision
Economists regard the measure as largely symbolic, as top earners find ways to avoid it or move abroad.
Raising windfall taxes to 35 per cent and extending them to 2028 is expected to raise £45 billion over the next five years.
Mr Hunt is also expected to outline up to £35 billion spending cuts.
Ahead of a G20 meeting of world leaders in Indonesia on Tuesday, Mr Sunak said the most powerful economies had to band together to address the global economic turmoil.
He said: ‘Putin’s war has caused devastation around the world, destroying lives and plunging the international economy into turmoil.
Household income will drop by an average of £800 from around £54,700 to around £53,900
‘This G20 summit will not be business as usual. We will call out Putin’s regime and lay bare its utter contempt for the kind of international co-operation and respect for sovereignty that forums like the G20 represent.’
Meanwhile Treasury Chief Secretary John Glen said Government could be made ‘more efficient’ by accelerating the sale of under-used buildings, particularly ‘expensive central London properties’, and ‘turbo-charging’ plans to digitise public services.
Writing in the Sunday Telegraph, he said: ‘To continue delivering the things people care about in the face of inflationary pressures, without making the problem worse through extra spending across the board, we have to take difficult decisions and make Government more efficient. That means rooting out waste.
‘It’s outrageous that public money – your money – is being soaked up by the system when it could be channelled towards areas that really need it.’
Insisting the British public want the Tories to be trustworthy rather than ‘popular’, Mr Hunt said the hope for the week ahead is to show the Government has a plan to stabilise the economy.
In an interview with the Sunday Times, he said the ‘tragedy’ of Trussonomics was that both the former PM and her chancellor had the right idea about boosting growth.
But he said it was a ‘mistake’ to act without showing ‘we can pay our way as a country’, adding that he will ‘put people ahead of ideology’.
The disastrous mini-budget may have cost the country as much as £30 billion, according to the Resolution Foundation, potentially doubling the task at hand for the Chancellor, as he seeks up to £60 billion in savings and extra revenue.
The think tank’s economists estimate that Liz Truss and Kwasi Kwarteng blew £20 billion on unfunded cuts to national insurance and stamp duty, with a further £10 billion lost to higher interest rates and Government borrowing costs, The Observer reported.
Mr Hunt suggested he will not be pulling any rabbits out of the hat when he delivers his statement next week, unlike his predecessor – who dramatically whipped out a cut to the top rate of income tax in his ill-fated ‘fiscal event’.
‘I think it is fair to say this is going to be the first rabbit-free budget for very many years,’ he said.
‘I’m sorry to disappoint but no, this is not going to be a time for rabbits I’m afraid.’