Sunday, 29 Jan 2023

Jeremy Hunt mulling up to £20billion of tax rises in Halloween budget

Jeremy Hunt announces changes to measures from mini-budget

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The Chancellor has been told by the Office for Budget Responsibility (OBR) to raise £40billion to repair public finances, and Mr Hunt may be planning to raise half the amount by raising taxes. This weekend, the OBR is expected to deliver an economic forecast to Mr Hunt over the weekend and it will be discussed with the next Prime Minister.

The Newspaper speculated that Mr Hunt could seek to reform capital gain rules and keep them aligned with general taxation, which could earn the Government £3.5billion a year.

He may also abandon a Government-funded removal of green levies from energy bills and reintroduce the cost in April.

The new Chancellor could slash defence spending despite former Prime Minister Liz Truss’s pledge to increase defence spending to three percent of GDP, a move which may save £15billion.

Government sources reported by the Telegraph have said that Mr Hunt will try to find the additional £15million needed with tax rises for the wealthy.

It’s expected that the Chancellor will not be considering measures which will affect those in lower-income households who are currently struggling with the cost of living crisis, such as a rise in fuel duty.

One possible way in which Mr Hunt could raise £15million is to reintroduce the National Insurence rise which was first introduced by Rishi Sunak in April.

Ms Truss pledged to cut national insurance in her leadership election and was later announced in the mini-budget set out by former chancellor Kwasi Kwarteng.

Another possibility is the suggestion by the Labour party to abolish non-dom status, a term used for UK residents who live outside the country and only pay tax on money earned in the UK.

Mr Hunt may potentially raise £500million a year by keeping the surcharge banks pay on their profits at eight percent, which will mean banks face a cooperation tax of 33 percent from April next year.

Paul Tucker, the former Deputy Governor of the Bank of England, had a controversial proposal to cut the amount of interest the Government pays out to commercial lenders who have deposits at the Bank of England.

It would save up to £90billion over the next two years, but risks being seen as Government interference with the Bank of England, and so is unlikely to be implemented.

The chancellor under David Cameron, George Osborne favoured an 80-20 split of spending cuts to tax rises, but it is believed Mr Hunt could be exploring options for a divide as even as 50-50.

Such tax rise may be controversial among Conservative Party members, who originally supported the former prime minister Ms Truss’s economic proposals.

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Mr Hunt’s financial plan is expected to be delivered by the end of October but may be delayed due to Ms Truss stepping down as Prime Minister last Thursday.

A spokesperson for Downing Street said: “We are working in preparation for the 31st but obviously the decision on proceeding with that and with that timetable would be for the new prime minister.”

The next prime minister will decide on whether the budget should go ahead or be postponed, and it’s expected that Mr Hunt will argue the budget should continue with the planned date.

On Friday, Mr Hunt promised that the Government will do whatever is necessary to get drive down debt in the medium term.”

He added he will “ensure that taxpayers money is well spent, putting the public finances on a sustainable path as we grow the economy”.

“Strong public finances are the foundation of a strong economy. To stabilise markets, I’ve been clear that protecting our public finances means difficult decisions lie ahead.”

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