Hunt to wield axe in £35bn of spending cuts
Chancellor also plans £25bn in tax rises and £10bn raid on middle-class pensions
JEREMY hunt is to outline spending cuts of up to £35billion in next week’s crucial Autumn statement – and is also weighing up a £10billion tax raid that would hit the middle classes, it emerged last night.
The Chancellor is understood to have devised proposals for the huge cutbacks after further discussions with Prime Minister Rishi sunak on saturday.
he is also planning to push through £25billion of tax rises in order to fill a budget black hole now estimated at a staggering £60billion.
Mr hunt is due to submit the main outline of his plans to the Office for Budget Responsibility by this morning. he had hoped for a 50/50 split between cuts and tax rises but it is understood that last week’s dire Bank of England warning of a long recession means tax revenue will be lower than previously expected.
Yesterday, a Cabinet minister insisted the Government would only put up taxes as a last resort. Oliver Dowden, Chancellor of the Duchy of Lancaster, told sky News: ‘unfortunately, because of the difficult decisions we have to take, we are going to have to take difficult decisions on both tax and spending.
‘But of course, as Conservatives – and i know that the Prime Minister and the Chancellor share this view with me – 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 difficulties in the public finances, there is likely to be a mix of the two.’
Middle class workers also face a £10billion hit as the Chancellor considers a tax raid on pension contributions. Mr hunt is believed to be weighing up a change to tax rules that encourage workers to contribute to their pension pots. The Government could reduce the rate at which income tax relief is applied to 5.5million higher-rate taxpayers, from 40p to as low as 20p. This would raise between £8billion and £10billion each year.
But it would come at the expense of workers earning more than £50,270 per year, who receive a tax break of 40 per cent on their pension contributions. Pension tax relief currently costs the Government £42.7billion each year.
A Treasury source told The sunday Telegraph income tax relief on pensions ‘has been discussed’ and is still on the table.
A similar plan in 2016 by thenChancellor George Osborne was abandoned amid warnings it would cause a ‘riot’ in the Conservative Party.
sir steve Webb, former pensions minister and partner at law firm Lane Clark & Peacock, said: ‘£10billion is roughly five million people losing £2,000 each – the majority of whom probably voted Tory last time.’
he added that if ministers wanted to alienate Conservative voters, then to ‘ abolish the higher-rate tax reliefs and scrap the triple lock and you are pretty much done’.
Downing street is also reportedly looking at extending the freeze on the lifetime allowance for retirement funds for at least five years. But critics say that a refusal to increase the maximum limit on pension funds could force an estimated two million more people to pay tax penalties of up to 55 per cent on pension withdrawals.
‘Bearing down on spending’