Jeremy Hunt announces changes to measures from mini-budget
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Hunt and Prime Minister Rishi Sunak are battling to plug a £50billion hole in the UK’s finances, and keep the lid on inflation.
The UK’s tax take is already at a 70-year high but that won’t stop the deadly duo.
We saw what Sunak is capable of, when he was Chancellor.
Back in March 2021, he froze income tax, capital gains tax and inheritance tax threshold for five years, dragging millions into higher tax brackets as inflation rises.
He also froze the threshold for paying the brutal 55 percent tax on pensions, and brought in the controversial 1.25 percent National Insurance increase.
Sunak said this was needed to fund his own Covid furlough blitz.
Now he’s lining up a second attack, using predecessor Kwasi Kwarteng’s disastrous mini-Budget as cover.
It’s for our own good, apparently.
Hunt has already done some of the heavy lifting already, making a string of U-turns after his appointment.
It’s nowhere near enough, with another £30billion of savings required.
The Chancellor will also look to cut spending, but that could prove difficult. The NHS already has seven million on the waiting list and winter isn’t even here, while defence spending surely can’t be a target as Russia intensifies its war in Ukraine.
The state pension triple lock is on the hit list, with the government repeatedly refusing to say whether it will be suspended for the second year in a row.
Axing that will be a slap in the face for 12.5million pensioners and could cost the Tories the next election on its own.
Even if Sunak did break what is a Tory manifesto commitment it would only save £5billion.
Much more will be needed.
Half the savings the Treasury hopes to generate will come from tax hikes, so what can we expect?
We already know alcohol duties are going to rise. An increase to fuel duty seems less likely, though, as this will drive inflation even higher.
Kwarteng’s stamp duty cut may be reversed, although maybe not as house prices are now falling.
Another option is to hand local authorities the freedom to hike Council Tax bills even more than usual from April.
I’m racking my brains to work out which taxes Hunt and Sunak have the nerve to increase, but it isn’t easy.
None will be popular. Many will not even work.
They could lift capital gains tax thresholds in line with income tax brackets. That could backfire as many will delay taking gains as a result.
I can’t see Hunt increasing inheritance tax, the most hated levy of all. IHT needs a massive overhaul, not just tinkering.
Although who knows.
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The big three personal taxes are income tax, National Insurance and VAT. One of these will have to give, if the Treasury is to make its sums add up.
Increasing VAT from today’s 20 percent would only worsen the cost of living crisis by driving prices even higher.
That would scupper Bank of England efforts to squash inflation by hiking interest rates.
Income tax thresholds have already been frozen until at least April 2026, costing millions a staggering £2,000 each.
Hunt now seems likely to extend the freeze to 2028. That might helps his maths and could be eased later.
I still reckon he needs to do more and I don’t think we can rule out restoring the NI hike. It was Sunak’s baby after all.
U-turning here would be hugely embarrasing, but generate a much-needed £12billion a year.
I wouldn’t rule anything out today. Sunak and Hunt surely haven’t.
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