Rishi Sunak under pressure ahead of Autumn Budget
RISHI Sunak is weighing up a boost in taxes for the wealthy as he comes under pressure from a former Cabinet minister to protect “vital” school budgets in his bid to balance the books.
The Prime Minister and Chancellor are preparing for a crunch week in Westminster, with painful public spending cuts and tax hikes expected to pepper Thursday’s Budget as the Tories seek to find up to £60 billion in savings and extra revenue.
A Treasury source confirmed one option under consideration is a reduction in the threshold at which people have to start paying the highest rate of income tax, from £150,000 to £125,000.
This would essentially turn the previous chancellor’s approach to taxing the wealthy on its head, extending the reach of the 45p top rate where Kwasi Kwarteng scrapped it altogether.
It comes as Jeremy Hunt has warned of a “tough road ahead” for the UK, with GDP contracting by 0.2 per cent.
Having warned the country he will be forced to make “eye-watering” choices to restore “economic stability”, the Chancellor is being urged by the former education secretary to shield schools from stinging cuts.
Kit Malthouse, who held the role during Liz Truss’s brief tenure in Number 10, stressed things are “tight” in education, with schools “already struggling” with soaring energy bills, general inflation and the cost of living.
Mr Malthouse said he knew from his time in the Department for Education that headteachers “across the land” are now questioning whether they can manage with the same staffing levels next year, given the squeeze on their budgets. “Now, when you make cuts like Jeremy’s going to have to make ... you have to do that within a framework of priorities,” he said.
“You have to say, look, there are some areas that we have to protect because they’re so important and so vital that we’ve got to stand by them even in times of financial difficulty.”
Meanwhile, CPI (Consumer Price Index) inflation is expected to have risen further last month after hitting a 40-year high of 10.1% back in September.
The Conservative manifesto in 2019 pledged to “increase the budget by at least 0.5% above inflation every year of the new Parliament”, suggesting failing to add to the planned rise could constitute a breach.
But The Telegraph reported that ministers will argue the promise can be met by taking the average annual increase across the five-year period as a whole. A Treasury spokeswoman said: “Our number one priority is economic stability and restoring confidence that the United Kingdom is a country that pays its way.”
THE SNP have ramped up pressure on the Conservative Government to use this week’s Budget to adopt new tax policies and ditch its “austerity 2.0” agenda to protect public services and the most vulnerable in society.
As well as expanding the earlier windfall tax to include all firms raking in excess profits, the party has challenged the Chancellor to introduce a new levy on share buybacks – which allows firms to funnel record profits to shareholders rather than investing back or passing on to customers or households – and to scrap non-dom tax status in order to raise billions in revenue.
In a recent report on share buybacks, the Institute for Public Policy Research (IPPR) think tank warned that while households struggle, “some companies are reaping extraordinary windfall rewards and passing these to alreadywealthy shareholders”. It said that if the UK Government introduced a 1 per cent tax on share buybacks by FTSE-listed companies it could raise £225 million in a single year.
If “taxed at the same 25% rate as the windfall tax this could raise a maximum of £11 billion a year”, the report stated.
In the US, President Joe Biden has recently introduced a 1% tax on share buybacks to help tackle the cost-of-living crisis.
Separately, scrapping the non-dom status – which Rishi Sunak’s family has benefited from – could raise more than £3.2 billion each year.
The SNP’s shadow chancellor Alison Thewliss MP said: “If the UK Government actually made the right economic choices then some of the most vulnerable in society could be protected and so, too, could public services from swingeing cuts.
“The looming threat of ‘austerity 2.0’ is a pernicious Tory political choice – not an economic necessity. The
Chancellor must abandon those dangerous plans and instead set out key tax policies that will protect struggling households and businesses.
“Following in the steps of the US and taxing share buybacks – which has seen firms funnel eye-watering profits back to pockets of shareholders – and also scrapping the controversial non-dom tax status could raise billions of pounds in revenue without hammering those already struggling to make ends meet.
“With a recession looming, rocketing prices and higher household bills, the Tory Government must heed the warnings and deliver a Budget that supports people – not one that further entrenches the poverty the Tories have caused.
“However, the reality is that it’s only with the full powers of independence that Scotland will be able to reject Tory austerity and build a fairer, greener and more equal society.”
First Minister Nicola Sturgeon said on Friday she is “profoundly concerned” about what lies ahead in the Autumn Budget.
She said the UK was in an “incredibly difficult” position after meeting Prime Minister Rishi Sunak and Chancellor Jeremy Hunt at the British-Irish Council summit in Blackpool.
Speaking to reporters afterwards, Ms Sturgeon said: “I don’t know the detail, obviously, of the statement the Chancellor will deliver next week, next Thursday.
“I, like everybody else, can read the signals, can read the runes of that.
“I don’t think it will come as any surprise to hear me say I’m profoundly concerned at what we may hear from the Chancellor on Thursday.”
Mr Hunt has warned he will make “eye-watering” decisions after the economy shrank in what is predicted to be the beginning of a long recession.
This will include painful public-spending cuts and tax hikes to fill the so-called “black hole” of around £40bn in the nation’s finances.