Stealth tax on budget incomes could reach £35bn and push Britain into recession, Tory MPs warn
Stealth tax on budget incomes could reach £35bn and push Britain into recession, Tory MPs warn
- Ministers brace for confirmation The UK is heading into an economic downturn today
- Expect to hear that the economy contracted 0.5 percent in the third quarter
- MPs warned the government could make matters worse with tax increases and spending cuts
- Rishi Sunak and Chancellor are expected to meet with Budget before November 17 today
Budget tax increases could send Britain into recession, Tory MPs warned last night, as figures showed a planned income tax raid could take £35bn out of Britons’ pockets.
Ministers are bracing for official confirmation that the UK is heading into an economic downturn this morning, with the Office for National Statistics expected to say the economy contracted by around 0.5 percent in the third quarter.
But Tory MPs warned the government could worsen the situation next week if it goes ahead with a massive package of tax increases and austerity.
New analysis by the Institute for Fiscal Studies (IFS) revealed that a planned six-year freeze on income tax thresholds could raise £35bn a year by 2028 – equivalent to nearly 6p off the base rate. Thresholds for national insurance, inheritance tax and a range of other taxes will also be frozen.
Former company secretary Jacob Rees-Mogg warned that raising taxes at a time of economic fragility could create a “downward economic spiral” and called on ministers to boost growth instead.
Sir John Redwood said raising taxes would trigger a recession and urged ministers to focus instead on ‘getting rid of unnecessary spending’.
Tory MPs have warned the government could worsen the situation next week if it goes ahead with a massive package of tax increases and austerity. Pictured: Chancellor Jeremy Hunt with Prime Minister Rishi Sunak
Former company secretary Jacob Rees-Mogg (pictured) warned that raising taxes at a time of economic fragility could create a ‘downward economic spiral’ and called on ministers to boost growth instead
The former cabinet minister warned: “We are at the point of tax saturation. I urge the government not to introduce more taxes. Savings are possible. We need a credible growth strategy, borrowing reasonable amounts to weather a recession. We cannot afford a long and deep recession, otherwise we would have an even bigger deficit.’
Rishi Sunak and Chancellor Jeremy Hunt are expected to meet today to finalize details of the planned November 17 budget.
Sources in Whitehall said the two men wanted to fill a black hole in public finances estimated at more than £50bn.
Increases in government spending after 2025 will be pegged at just 1 percent per year, suggesting major cuts in public services.
The Treasury said the measures were needed to bring inflation under control and prevent rising prices from hitting households and businesses.
Sources said the planned tax threshold freeze would do “much of the heavy lifting,” but warned that other tax increases would be needed, in addition to a major package of spending cuts.
The IFS said yesterday that the freeze on income tax thresholds would raise £30bn by 2026 and a further £5bn by 2028 if inflation returns to the 2% target. But the freeze is expected to drag more than three million people into paying higher income tax rates.
Former Chancellor Philip Hammond told GB News that further tax increases were inevitable as an aging population puts more demand for services such as health care. He added, “That’s an arithmetic fact, it’s not a political judgment.”