IN the run-up to Thursday’s Budget, Jeremy Hunt has warned he plans to be Scrooge and will inflict some “very horrible decisions” on all of us.
It is normal for a Chancellor to float some ideas for potential tax rises in advance, so voters and the financial markets aren’t taken by surprise on the day.
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But recent weeks have seen an extraordinary number of leaks and authorised briefings from the Treasury as Mr Hunt looks to fix an estimated £60billion hole in the nation’s finances.
Understandably, this torrent of potential bad news flowing out of Whitehall has left people worried and confused.
The Chancellor, meanwhile, has appeared to be revelling in his role as the bearer of endless bad news about tax hikes – alarming low-tax Tory MPs in the process, who are worried he risks choking off growth.
Political Editor Harry Cole looks at the ideas he is considering and gives each a Tiny Tim’s crutch rating out of five for the pain it will cause . . .
Let energy bills soar
FORMER PM Liz Truss had promised to cap energy bills for the typical household at £2,500 for the next two years, at a cost to Government of around £10billion a month.
Having already ripped up this commitment, Mr Hunt is expected to announce support will in future be targeted at the least well-off only.
For everyone else, a new energy cap of around £3,000 will kick in next spring.
There will also be no repeat of the £400 one-off payment made to households this year to keep bills down.
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So overall many families will be £900 worse off – the equivalent of £75 every month.
PAIN RATING: 4/5
Freeze tax thresholds
THIS sneaky stealth tax is expected to bring in £30billion a year by 2026.
The basic rate of income tax currently kicks in on earnings over £12,571, and the 40p higher rate at £50,271.
If the Chancellor does not put these rates up with inflation until 2027/28, it will drag millions more people into paying more tax.
That is because rising wages will see more workers hit the thresholds, even though they are no better off in real terms.
Some of the least well-off will be dragged into paying the lower rate for the first time.
PAIN RATING: 4/5
Whack up council tax
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TOWN Halls are not allowed to increase council tax above 2.99 per cent – plus a one per cent levy for social care – without holding a local referendum.
However, Mr Hunt is examining plans to lift the threshold, in theory to provide more funding for social care.
Ministers would then try to claim it is local councils hiking bills, but this might not wash with voters.
The average Band D council tax set by local authorities in England is already £1,966 a year.
PAIN RATING: 3/5
Clobber motorists
ON average, drivers of petrol and diesel cars pay £165 a year in road tax, yet electric vehicles are exempt.
Mr Hunt is considering charging electric car owners for the first time, as the Treasury is worried about a loss in fuel duty as more people go electric.
He could also whack up fuel duty, despite the cost of filling up being sky high.
As it stands, the 5p cut in fuel duty is due to expire in March 2023.
Failure to extend it would trigger a revolt by Tory MPs, so any decision is likely to be deferred until next year – so a lower pain rating now.
PAIN RATING: 2/5
Hammer small business
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ANOTHER sly move under consideration is freezing the £85,000 threshold at which companies must start paying VAT, instead of allowing it to rise with inflation.
It means more small companies will be dragged into paying the tax without Mr Hunt having to put up headline rates.
The threshold was already frozen until 2024, but this will likely now be extended until 2026.
PAIN RATING: 3/5
Hit more with 45p tax
IN order to be able to reprise ex-Chancellor George Osborne’s mantra that “we’re all in this together”, Mr Hunt is expected to cut the income level at which the top 45p rate of tax kicks in – from £150,000 to £125,000.
This will pull thousands more into the highest rate of tax over the next four years.
While it will allow him to say the wealthiest will pay the most, it raises only £1.3billion, roughly half the amount spent every year putting up asylum seekers in hotels.
Critics warn it will deter investment in the UK.
PAIN RATING: 2/5
Bash investors and savers
HIGHER-RATE taxpayers pay a 20 per cent rate on profits from assets such as shares and 28 per cent on second homes, above a £12,300 tax-free allowance.
Mr Hunt is considering reducing this threshold to £6,000.
Meanwhile, the annual tax-free dividend allowance on investments such as shares is £2,000.
Above this rate higher-rate taxpayers pay a tax of 33.75 per cent on profits.
The Treasury is said to be considering a 1.25 per cent increase.
On pensions, the lifetime allowance, currently just over £1million, could be frozen.
PAIN RATING: 3/5
Extend windfall tax
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THIS is the most popular measure Mr Hunt is considering by far.
Earlier this year, the Government imposed a 25 per cent levy on oil and gas company profits – most of which have been made off the back of the surge in prices caused by Russia’s invasion of Ukraine.
Mr Hunt is now expected to increase this to 35 per cent and extend the length of the new tax from 2025 until 2028.
It will also be extended to cover electricity generators.
PAIN RATING: 1/5
Spending cuts
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AS well as tax rises, Mr Hunt is also expected to take an axe to State spending to fill the black hole.
With the public sector facing demands for large wage increases, and inflation stubbornly high, schools, hospitals and others fear they’ll be left facing real-term cuts.
A row is brewing over defence cuts and the NHS is demanding an extra £7bn.
Plus some 28 Tory MPs say education cuts would be “indefensible” post-Covid.
PAIN RATING: 3/5
