Hunt vows to grip economic ‘storm’ with major tax hikes in hours

Jeremy Hunt issued warning ahead of new budget

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Vowing to put the country on a “balanced path to stability”, Jeremy Hunt will insist his Autumn statement will grip the “enemy” of inflation, which has soared to a 41-year high of 11.1 percent. Mr Hunt will say his “difficult decisions” are necessary to keep mortgage rates low and tackle the rocketing energy and food prices intensifying the cost-of-living crisis. But Tories on the right of the party are already voicing anger about the prospect of raising taxes, while energy bill support is likely to be scaled back and public services face cuts.

The much-anticipated fiscal showpiece is also expected to see the triple lock on pensions protected in what would be a massive victory for the Daily Express and campaign group Silver Voices following a relentless crusade.

A staggering 330,000 people have signed our petition demanding the government reinstates the manifesto commitment.

Dennis Reed, Director of Silver Voices, said: “In view of the upward surge in inflation it would be barbarous if the Government did not bow to the force of public opinion and restore the triple lock protection to state pensions on Thursday.”

Mr Hunt will seek to use his hour-long Commons statement to restore the UK’s economic credibility in the wake of Liz Truss’s short-lived administration.  

It will mark an abrupt about-turn on Kwasi Kwarteng’s disastrous mini-budget two months ago, which plunged the country into financial turmoil. His £45 billion package of unfunded tax cuts on top of a massively expensive energy support package, shocked mainstream economists and spooked the markets. Not only that but the Bank of England was forced to intervene to stabilise the economy.

The Chancellor will insist his strategy “protects our long-term economic growth” while being “compassionate” to the most vulnerable on society.

“As countries all over the world grapple with inflation, our plan reflects British values: we are both honest about the challenges, and fair in our solutions,” he is expected to tell MPs.

“We are taking difficult decisions to deliver strong public finances and help keep mortgage rates low, but our plan also protects our long-term economic growth. At the same time, we protect the vulnerable, because to be British is to be compassionate.

“There is a global energy crisis, a global inflation crisis and a global economic crisis. But the British people are tough, inventive, and resourceful. We have risen to bigger challenges before.

“We aren’t immune to these global headwinds, but with this plan for stability, growth and public services – we will face into the storm”.

The long-awaited independent forecasts from the Office for Budget Responsibility (OBR) will also be published and are expected to detail bleak prospects for an economy teetering on a recession.

Mr Hunt will vow policies that will “work together” with the interest rate-rising Bank of England with around £60 billion of hikes and cuts.

Thursday’s announcement comes amid rocketing inflation with food prices rising at their fastest rate for 45 years, with the cost of basics such as milk, cheese and eggs surging. Food price inflation hit 16.2 percent in the year to October. 

Energy and fuel costs also rose sharply, pushing the overall inflation rate to its highest level since 1981. The Chancellor will warn that “high inflation is the enemy of stability” as it sends food and fuel bills soaring, causes businesses to fail and raises unemployment.

“It erodes savings, causes industrial unrest, and cuts funding for public services. It hurts the poorest the most and eats away at the trust upon which a strong society is built,” he is set to say.

“Families across Britain make sacrifices every day to live within their means, and so too must governments because the United Kingdom will always pay its way.

“We are taking a balanced path to stability: tackling the inflation that eats away at a pensioner’s savings and increases the cost of mortgages to families, at the same time supporting the economy to recover. But it depends on taking difficult decisions now.”

Despite the gloomy inflation figures, some analysts believe the worst is now over. Martin Beck, chief economic adviser to the EY Item Club, said inflation could even plunge to two percent the end of next year.

“The EY ITEM Club wouldn’t be surprised if inflation falls to close to 2 percent by the turn of 2023 and 2024, substantially easing the current squeeze on spending power faced by consumers,” he said. “This would also help lift the economy out of the recession.”

But Labour warned that Britain is “falling behind on the global stage”. Shadow chancellor Rachel Reeves said: “What Britain needs in the Autumn Statement are fairer choices for working people, and a proper plan for growth.”

Mr Sunak has warned that inflation is the “enemy we need to face down” but insisted the decisions in Thursday’s autumn statement would be “based on fairness, they will be based on compassion”.

Mr Hunt is expected to impose stealth taxes by freezing the rates at which workers begin paying higher rates, drawing more into higher brackets as inflation soars.

These are likely to be accompanied by a raising of the minimum wage, and a lowering of the threshold for when the 45 percent top rate of income tax comes in from £150,000 to £125,000.

The windfall tax on oil and gas giants is expected to be increased and widened to electricity generators. But the energy bill support package unveiled by Liz Truss is expected to be made less generous from April.

Mr Hunt is also likely to set out whether benefits and state pensions will rise in line with inflation. He is expected to allow local authorities to further raise council tax without referendums and delay Boris Johnson’s lifetime cap on social care costs.

Among the Tory critics, former cabinet minister Esther McVey has warned she will not support tax rises without the scrapping of the “unnecessary vanity project” of HS2.

Former Tory Minister John Redwood called for the Chancellor to give the country a “Christmas present” by cutting taxes. “The government needs to understand it needs to look after voters as well as worry about markets,” he said. 

“The politics of this week require the government to marry Liz Truss’s growth enthusiasm with enough control of the deficit and borrowing to show it is all affordable. Do that and they could even make most people happier. That would be a great Christmas present.”

Simon Clarke, who was in Liz Truss’s cabinet during her disastrous mini-budget, warned Mr Hunt not to “throw the baby out with the bathwater” in his autumn statement by imposing too many tax hikes.

The backbench Tory told BBC Radio 4’s PM programme: “I hope they will strike a balance which leans much more to spending reductions than tax rises to balance the books.”

Motoring groups have urged Mr Hunt not to hike fuel duty. The RAC told him that increased pump prices could push inflation even higher with spokesman Simon Williams saying: “When the prices drivers pay to fill up rise, inflation seems certain to follow. That’s something the Chancellor must recognise as he considers what action to take.”

Mr Hunt will hope that his package will reduce the need for the Bank to further hike interest rates, with experts already pencilling in an increase from 3 percent to 3.5 percent.

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