In Thursday’s Autumn Statement, approximately £35 billion in spending cuts and plans to raise around £20 billion in tax revenue are anticipated.
None of Jeremy Hunt’s decisions have been officially confirmed, but it is believed that freezing tax thresholds will generate the majority of the additional revenue.
The tax on energy companies will also increase and continue for another six years.
It is believed that independent forecasts have identified a shortfall of approximately £55 billion in the public finances.
While the government will not confirm any of its previous decisions, the structure of the building blocks is evident.
After the chaos of early autumn, the chancellor has stated that closing the gap between tax revenue and government spending is an absolute necessity.
There is an economic debate about the necessity and urgency of doing so, but the government’s position, which we’ll hear from Mr. Hunt on our show this Sunday, is that they have no choice.
And ever since he became chancellor, he has stated in somber tones that this would necessitate tax increases and spending cuts.
In Thursday’s Autumn Statement, approximately £35 billion in spending cuts and plans to raise around £20 billion in tax revenue are anticipated.
None of Jeremy Hunt’s decisions have been officially confirmed, but it is believed that freezing tax thresholds will generate the majority of the additional revenue.
The tax on energy companies will also increase and continue for another six years.
It is believed that independent forecasts have identified a shortfall of approximately £55 billion in the public finances.
While the government will not confirm any of its previous decisions, the structure of the building blocks is evident.
After the chaos of early autumn, the chancellor has stated that closing the gap between tax revenue and government spending is an absolute necessity.
There is an economic debate about the necessity and urgency of doing so, but the government’s position, which we’ll hear from Mr. Hunt on our show this Sunday, is that they have no choice.
And ever since he became chancellor, he has stated in somber tones that this would necessitate tax increases and spending cuts.
Without explicitly increasing taxes, the Treasury can raise billions. In addition, the highest earners could begin paying the maximum tax rate of £125,000 instead of £150,000. According to reports, the freezes on thresholds are scheduled to last until 2028.
As an alternative to a one-time windfall tax, a higher levy on the profits of energy companies could be levied for the same duration. The government-instituted Energy Profits Levy is anticipated to increase from 25% to 35%, and some electricity generators will be required to pay for the first time.
These are significant decisions with significant repercussions, but the government hopes that raising all this cash will allow them to increase benefits and pensions in line with inflation. One minister informed me that they would be “very surprised” if the chancellor did not provide this assurance this week. There is a great deal at stake.
The announcement on Thursday will also have a significant impact on public spending.
The government departments are expected to be informed on Thursday that they must adhere to the funds allotted to them in 2021 to last until 2025.
Consequently, the actual amounts of money that were distributed back then are likely to remain the same; however, this was before inflation accelerated dramatically.
Many departments are chafing under the burden of inflation-driven cost increases. We are all aware that a pound in 2022 cannot buy what it could in 2021.
Therefore, sticking to the budget does not mean maintaining the same situation for government agencies. And it won’t get easier. Beyond 2025, the chancellor is likely to announce that government departments can only anticipate annual budget increases of 1%. That would significantly alter how the government divides the pie.
There is a great deal of uncertainty surrounding all of this. As with the weather, economic forecasts, including those by the OBR, are subject to change.
In addition to other implications, these plans suggest that the Conservatives will enter the next election promising a less generous state. Despite Rishi Sunak’s instincts, it is currently difficult to conceive.
However, the chancellor will present his decisions as an unavoidable reality on Thursday.
Mr. Hunt and Mr. Sunak will experience difficulties from both sides of their fractious party. One former conservative minister argued that raising taxes was a grave error.
“It’s the last thing you want to do if we’re entering a recession,” they said, adding that if things got worse, they could “kiss the election goodbye.”
A member of parliament from a different political party is concerned that the Treasury is pursuing its “happy place” of making cuts rather than addressing the longer-term issue of reviving the economy.
And the Tories are likely to face significant political problems with certain segments of the public: weariness and reluctance towards another cut to public spending after a promise that the austerity era was over.
Tax increases could be detrimental at a time when millions are already struggling to make ends meet due to the rising cost of living.
Despite the 44-day trauma endured by the Truss administration due to the pandemic and war in Europe, ministers will argue that difficult decisions are necessary.
A senior minister advised me, “We must get people to comprehend it.” This week, the current No. 10 and No. 11 players face a crucial few days of competition.
