Jeremy Hunt hoped to increase the number of people paying the top tax rate

Jeremy Hunt is expected to increase the number of people paying the highest tax rate by lowering the threshold to £150,000, according to Treasury sources.

The move to increase the number of taxpayers paying the 45p tax rate is a handbrake from the Liz Truss government, which has proposed abolishing the rate altogether.

A Treasury source said there was an option to increase the overall tax rate, but a “significant lowering” of the threshold would be more likely for people with higher incomes.

In next Thursday’s autumn statement, Hunt will outline tax increases and spending cuts totaling £60bn, broken down roughly into £35bn of spending cuts and £25bn of tax increases.

The move to raise the threshold for the 45 pence rate would be in line with Hunt’s public promise that tax increases should hit those with the “broadest shoulders”, though it is expected to freeze lower tax thresholds. , which will generate billions for the Treasury as more wage earners are pulled into different tax brackets by inflation.

However, the Treasury has ruled out changes to the higher-rate pension tax break, over concerns it could discourage people from saving and hit the middle-income earners.

Ministers are also discussing the possibility of significant tax increases by allowing changes to the rules that councils must hold referendums if they raise taxes by more than 2.99%.

Hunt and Rishi Sunak have put most of the fiscal pressure on spending cuts, though the statement will stick to the current spending review for the next two years, in which departmental spending is likely to be squeezed by inflation. But departments are likely to see the rate of spending decline after that point.

“Even during austerity, budgets have increased, but rates will be much lower than they could have been,” a Whitehall source said.

Sunak and Hunt are said to be interested in avoiding cuts in real terms of benefits or breaking the triple lock on pensions, where billions could be saved by raising both in line with earnings rather than inflation.

Preliminary work sent to the Office for Budget Responsibility is understood to have included the possibility of raising both in line with inflation, which many Conservative MPs have publicly demanded. However, a senior source said that while Hunt and Sunak’s instinct was to protect pensions and benefit increases, there were still concerns about the current balance of measures “to make the numbers add up” and that those areas were not They had been removed from the table. .

The scale of the necessary measures has been heightened by dire forecasts by the Bank of England last week, when it predicted that higher interest rates would push the economy into the longest recession since the 1930s.

The Bank blamed higher energy prices and a tight labor market for the decision to raise interest rates. Hunt’s fiscal tightening is likely to worsen the outlook, with the Bank saying the economy was already contracting and would continue to contract for eight consecutive quarters through the summer of 2024.

On Wednesday, former Treasury Secretary Harriett Baldwin was chosen to chair the Treasury select committee after her predecessor, Mel Stride, joined Sunak’s cabinet.

Baldwin, who previously worked for JP Morgan, has long been skeptical of the Bank of England’s performance, repeatedly pressing Governor Andrew Bailey on low interest rates long before Vladimir Putin’s invasion of Ukraine and the subsequent economic crisis.


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