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Hunt admits UK business taxes are too high

Demands at the event ranged from the reintroduction of tax breaks on shopping for overseas visitors to better co-operation with business and more “concrete” actions by government…reports Asian Lite News

Jeremy Hunt admitted on Monday that British corporate taxes were too high, as business called on the government to make good on promises to mend ties with the private sector.

Speaking at a set-piece event with about 250 corporate leaders intended to counter Labour’s charm offensive with business, the UK chancellor said the economy needed to grow more to bring taxes down.

“The tax burden is too high. We would like to bring it down,” Hunt said at the Business Connect event, acknowledging a backlash to the government’s decision to increase corporation tax from 19 per cent to 25 per cent this month. “The way we will bring the tax burden down is through growth.”

But even as he and Rishi Sunak promised to “listen” and “engage” with the private sector, with the prime minister declaring himself “unashamedly pro-business”, they were repeatedly pressed on their strategy for growth and trade.

Demands at the event ranged from the reintroduction of tax breaks on shopping for overseas visitors to better co-operation with business and more “concrete” actions by government.

Gerry Murphy, chair of luxury goods brand Burberry, said the post-Brexit withdrawal of value added tax breaks on UK shopping by overseas visitors had made the country the least attractive shopping destination in Europe.

“The UK is, by far, the weakest recovery of all those major [European] markets [in Burberry trading],” he added. “We are actively exporting business as a result of that policy to our continental competitors.”

There is a growing sense of Groundhog Day as we wait for concrete policy developments

Romi Savova, chief executive of financial services company PensionBee, said: “Many business leaders have engaged with the government across multiple events and there is a growing sense of Groundhog Day as we wait for concrete policy developments.”

Conservative party insiders privately admit that Labour leader Sir Keir Starmer has led a highly successful charm offensive with business in recent months, alongside shadow chancellor Rachel Reeves.

Sunak’s appointment of former Morgan Stanley executive Franck Petitgas as his new business and investment adviser is a sign of a new effort by the government to improve relations with corporate leaders.

Sunak also announced £100mn in government funding for a task force aimed at accelerating Britain’s capabilities in an area of artificial intelligence known as “foundation models” — which is used in chatbots such as OpenAI’s ChatGPT.

The prime minister said he would bear in mind the call to restore the VAT break, but government insiders said ministers were unlikely to take such a move, which they claimed could cost £2bn a year.

The chancellor added that it was right to have imposed a windfall tax on energy companies’ profits but that he would keep “a dialogue going . . . because we need to unlock investment in the North Sea”.

ALSO READ-Sunak goes live on LinkedIn to push growth plans

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PM paid over £1m in UK tax since 2019

A statement from Sunak’s accountants on Wednesday showed that his huge investment income and capital gains relate to a single US-based investment fund…reports Asian Lite News

Rishi Sunak has published his long-awaited personal tax returns – revealing his mammoth income from a US-based investment fund outside of his salary at Westminster.

The prime minister has raked in more than £4.7m over the past three years, the summary of his tax returns published for 2019-2020 to 2021-22 have revealed.

He made more than £1.9m last year alone – including £1.6m in capital gains and more than £300,000 in earnings and investment income.

And the PM paid more than £1m in UK tax over the three-year period, including £432,000 last year.

Sunak’s financial affairs have come under intense scrutiny ever since The Independent first revealed his wife Akshata Murty held “non-dom” tax status to avoid UK tax on foreign income.

She later renounced the non-dom status. But it subsequently emerged that Sunak had held a US green card and filed tax returns in America while he was chancellor.

Details of the couple’s fortune, believed to total around £730m, are also politically sensitive following warnings last week that Britons face a lost decade in living standards.

A statement from Sunak’s accountants on Wednesday showed that his huge investment income and capital gains relate to a single US-based investment fund.

This is the investment listed as a “blind management arrangement” on the list of ministers’ interests. Sunak is subject to UK tax on the investment income and gains received from the American fund.

Tax expert Dan Neidle said Sunak had done nothing wrong – but noted how little capital gains are taxed compared with income, saying Mr Sunak paid only 20 per cent tax on the £1.6m made from it last year.

Neidle – who probed ex-chancellor Nadhim Zahawi’s tax affairs – said “there is one interesting point: most of the £400,000 tax bill comes from the blind fund which doesn’t pay cash to him. So how does he pay the tax bill, given it’s so much more than he earns?”

Fellow tax expert Richard Murphy tweeted: “What do Sunak’s tax returns tell us? It is that a wealthy person with income beyond their immediate needs can always re-categorise large parts of that income as capital gains to reduce their tax rate on that part to 20 per cent, which is an insult to all who have to work for a living.”

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Personal income tax slabs revised; new tax regime now default

Tax. (IANS Infographics)

The FM also allowed a Rs 50,000 standard deduction to taxpayers under the new regime, where assessees cannot claim deductions or exemptions on their investments…reports Asian Lite News

While the Narendra Modi-led Central government presented Wednesday its last full-fledged Budget ahead of the 2024 general elections, Union Finance Minister Nirmala Sitharaman announced that the new tax regime will now be the default tax regime.

The FM also announced an increase in the income tax rebate limit from Rs 5 lakh to Rs 7 lakh under the new tax regime. “Currently, those with an income of Rs 5 lakh do not pay any income tax and I propose to increase the rebate limit to Rs 7 lakh in the new tax regime,” the Finance Minister said while presenting the Budget.

While a five per cent tax will be levied on total income between Rs 3 lakh and Rs 6 lakh, 10 per cent will be levied on Rs 6 lakh to Rs 9 lakh, 15 per cent on Rs 9 lakh to Rs 12 lakh, 20 per cent on Rs 12 lakh to Rs 15 lakh and 30 per cent on Rs 15 lakh and above.

Here are the revised tax slabs under new tax regime

  • Income of Rs 0-3 lakh is nil.
  • Income above Rs 3 lakh and up to Rs 6 lakh to be taxed at 5% under new regime.
  • Income of above Rs 6 lakh and up to Rs 9 lakh to be taxed at 10% under new regime.
  • Income above Rs 12 lakh and up to Rs 15 lakh to be taxed at 20% under new regime.
  • Income above Rs 15 lakh to be taxed at Rs 30%.

The government, meanwhile, also proposed to reduce highest surcharge rate from 37 per cent to 25 per cent in new tax regime.

While explaining the new tax regime, Finance Minister Nirmala Sitharaman also spoke about the losses the Centre would undertake for facilitating it. “India will lose Rs 35,000 crore of net tax revenue to provide relief to the middle-income group. “Revenue of about Rs 38,000 crore — Rs. 37,000 crore in direct taxes and Rs 1,000 crore in indirect taxes — will be forgone while revenue of about Rs 3,000 crore will be additionally mobilized. Thus, the total revenue forgone is about Rs 35,000 crore annually,” she said.

The FM also allowed a Rs 50,000 standard deduction to taxpayers under the new regime, where assessees cannot claim deductions or exemptions on their investments.

It may be recalled that the Finance Minister did not announce any change in income tax slabs in the last Budget.

Meanwhile, the FM had, last month, defended the new income tax regime saying it had not reversed any gains from the old regime’s simplicity. “If indeed there were gains of simplicity (from the old income tax regime), I want to assure they have not been reversed,” Sitharaman said in New Delhi. “For every tax assessee, it has 7, 8, 9, 10 exemptions. And with all that exemptions, the rate 10, 20, 30 per cent continues. It continues even today. We have not removed it. What we have done in the name of simplicity and to avoid harassment… removing harassment was what was aimed at when we brought in faceless tax assessment,” she added.

The government in Budget 2020-21 brought in an optional income tax regime, under which individuals and Hindu Undivided Families (HUFs) were to be taxed at lower rates if they did not avail specified exemptions and deductions, like house rent allowance (HRA), interest on home loan, investments made under Section 80C, 80D and 80CCD. Under this, total income up to Rs 2.5 lakh was tax exempt.

Currently, a 5 per cent tax is levied on total income between Rs 2.5 lakh and Rs 5 lakh, 10 per cent on Rs 5 lakh to Rs 7.5 lakh, 15 per cent on Rs 7.5 lakh to Rs 10 lakh, 20 per cent on Rs 10 lakh to Rs 12.5 lakh, 25 per cent on Rs 12.5 lakh to Rs 15 lakh, and 30 per cent on above Rs 15 lakh.

The scheme, however, has not gained traction as in several cases it resulted in higher tax burden.

“In simple words, the enhancement of this limit to seven lakh rupees means that the person whose income is less than Rs.7 lakhs need not invest anything to claim exemptions and the entire income would be tax-free irrespective of the quantum of investment made by such an individual. This will result in giving more consumption power to the middle-class income group as they could spend the entire amount of income without bothering too much about investment schemes to take the benefit of exemptions” explained Abhishek A Rastogi, Founder of Rastogi Chambers

The income tax changes rolled out to cost the govt revenue of about ₹38,000 crore. As a result of these proposals, revenue of about ₹38,000 crore – ₹37,000 crore in direct taxes and ₹1,000 crore in indirect taxes – will be forgone while revenue of about ₹3,000 crore will be additionally mobilized. Thus, the total revenue forgone is about ₹35,000 crore annually

Proposal for the salaried class and the pensioners including family pensioners, for whom proposed to extend the benefit of standard deduction to the new tax regime. Each salaried person with an income of ₹15.5 lakh or more will thus stand to benefit by ₹52,500: FM

ALSO READ-Hunt rules out significant tax cuts in Budget  

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Hunt rules out significant tax cuts in Budget  

The Prime Minister Rishi Sunak and Chancellor of the Exchequer Jeremy Hunt meet in Downing Street. Picture by Simon Walker / No 10 Downing Street

Hunt took aim at Labour, citing Keir Starmer’s pledge not to reopen the big government chequebook. The chancellor claimed the party had since made tens of billions of unfunded spending commitments…reports Asian Lite News

Jeremy Hunt has signalled tax cuts will only come “when the time is right” and be matched by “spending restraint”, as he sought to temper restive Conservative backbenchers’ expectations ahead of the budget in March.

However, the chancellor said he hoped to inject what he described as much-needed optimism about the country’s future, saying he wanted Britain to “have nothing less than the most competitive tax regime of any major country”.

In a speech at Bloomberg, the chancellor targeted economic inactivity and urged those who retired early after the Covid pandemic, or struggled to find a new job after the furlough scheme ended, to rejoin the workforce.

“We need you, and we will look at the conditions necessary to make it worth your while,” the chancellor said.

Hunt blamed Britain’s woes on “economic headwinds” that affected many countries, citing favourable growth statistics, and inflation remaining higher in 14 European Union countries. “Declinism about Britain is just wrong,” he said.

However, after pressure from Tory MPs – including the Conservative Growth Group founded by allies of Liz Truss – Hunt stressed that investment would only follow financial stability, and gave little hope that his March budget would reduce the tax burden.

“Confidence in the future starts with honesty about the present,” he said.

Hunt said “we need lower taxes” and that high rates “affect the incentives” of businesses to invest, but stressed that “sound money must come first”.

“Our ambition should be to have nothing less than the most competitive tax regime of every major country,” he said, but that would mean “restraint on spending”.

The creation of “mini-Canary Wharfs” – how Hunt dubbed the plan to reinvent Truss’s low-regulation, low-tax “investment zones” – was promised, with details about where they would be located to be announced “shortly”.

Hunt took aim at Labour, citing Keir Starmer’s pledge not to reopen the big government chequebook. The chancellor claimed the party had since made tens of billions of unfunded spending commitments.

After a cabinet away-day at Chequers, where ministers discussed gloomy polling, Hunt signalled his ambitions would not be realised immediately – paving the way for further announcements in the run-up to the next election about ways to boost growth.

“This is a project that is not going to happen in the next 18 months or the time span before the next election,” Hunt said. However, he still tried to provide hope to glum Tory MPs, adding: “Even in really difficult times, we can make incredible progress.”

Labour said Hunt and Sunak had no plan to fix “13 years of Tory economic failure”.

Rachel Reeves, the shadow chancellor, said: “Britain has so much potential. From creating good, new jobs in the industries of the future, to making our country the best place to start and grow a business, Labour’s proper plan for growth will grasp those opportunities and make our economy stronger to face up to the challenges.

“Thirteen years of Tory economic failure have left living standards and growth on the floor, crashed our economy, and driven up mortgages and bills. The Tories have no plan for now, and no plan for the future. It’s time for a Labour government that will build a better Britain.”

ALSO READ-Hunt to dismiss ‘gloom’ about economy

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Zahawi faces exit

Nadhim Zahawi leaves 10 Downing Street after being appointed Chancellor of the Exchequer. Picture by Simon Dawson / No 10 Downing Street

Prime Minister orders probe into the tax affairs of the chairman of his governing Conservative Party, saying there are “questions that need answering” about the dealings…reports Asian Lite News

Prime Minister Rishi Sunak has ordered an investigation into the tax affairs of the chairman of his governing Conservative Party, saying there are “questions that need answering” about the dealings.

Sunak said that he had asked his independent ethics adviser Laurie Magnus to look into Nadhim Zahawi’s multimillion-pound case, which relates to the 55-year-old’s co-founding of opinion polling firm YouGov in 2000 before he became a member of Parliament.

“Integrity and accountability is really important to me … There are questions that need answering and that is why I have asked our independent adviser to get to the bottom of everything,” Sunak told reporters.

He added that Zahawi would remain as party chairman during the investigation and had agreed to “fully cooperate” with the probe.

Zahawi said he welcomed the move and looked forward to explaining the “facts of the issue”, adding he would not discuss it further while the investigation was under way.

He has previously said the United Kingdom’s tax authorities ruled he had been “careless” with his declarations but had not deliberately made an error to pay less tax.

Zahawi has said questions were raised about his tax affairs when he was made finance minister last year by former Prime Minister Boris Johnson, prompting him to raise them with government officials and the tax office, which disagreed with the number of shares given to his father.

“So that I could focus on my life as a public servant, I chose to settle the matter and pay what they said was due, which was the right thing to do,” he said in a statement on Saturday.

He also said the tax office found he had not set up offshore tax arrangements, but the statement did not address whether he paid a penalty to the tax office.

A tax policy website – Tax Policy Associates – has estimated that Zahawi should have paid 3.7 million pounds ($4.6m) based on the capital gains tax incurred by the sale of tranches of shares in YouGov worth more than 20 million pounds ($24.7m).

The Guardian newspaper has reported that tax authorities had imposed a 30 percent penalty on top of the owed tax.

According to the government’s website, a penalty of 30 percent can be paid when there is “lack of reasonable care” or when the error is considered to be deliberate.

In the three months since Sunak became prime minister, his government has been buffeted by questions over the probity of some ministers and legislators after he promised to lead the country with “integrity, professionalism and accountability”.

The opposition Labour Party said Sunak, who assumed office after his two predecessors were brought down first by scandal and then economic chaos, was too weak to sack Zahawi.

“Everybody knows it’s wrong. He clearly isn’t going to resign and so the prime minister needs to show some leadership,” Labour Party leader Keir Starmer told reporters on Monday.

“This is a test of the prime minister. He promised us, his first words were integrity and accountability. Well, if those words mean anything, the prime minister should sack him and sack him today.”

Zahawi not planning to resign

Meanwhile, Zahawi is defying demands to quit as Conservative Party chairman despite paying a penalty to resolve a multimillion-pound tax dispute with HM Revenue & Customs.

Allies said on Monday that the former chancellor “absolutely” will not be quitting amid growing pressure over his estimated £5 million settlement.

Further “cronyism” allegations emerged as Rishi Sunak was already being urged by Labour to sack Mr Zahawi, who he brought back into a Cabinet-attending role after entering No 10.

Zahawi is also facing new allegations that he falsely told officials he had not exchanged WhatsApp messages with Conservative former prime minister David Cameron, who was lobbying for government loans for Greensill Capital.

The Times reported that it later emerged the pair had discussed the since-collapsed firm when messages were released to a select committee inquiry.

Zahawi said “morning” to waiting reporters and cameras as he arrived at Conservative Campaign Headquarters (CCHQ), but gave no comment on his financial affairs or position.

Former Downing Street communications chief Sir Craig Oliver said Mr Zahawi is “hanging on by a thread”. “I think he’s in serious trouble, you cannot be Conservative Party chairman and not go out and face the media,” he told BBC Radio 4’s Today programme.

“The problem for Nadhim Zahawi at the moment is it doesn’t all add up. Why did you take the job as chancellor when you were clearly in dispute with the HMRC, and he is yet to come out with an answer that is satisfying or feels comfortable on that point.”

Seizing on the Greensill allegations, deputy Labour leader Angela Rayner said “yet another” of Mr Zahawi’s stories was “unravelling”.

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Hunt to unveil spending cuts, tax rises

Chancellor and Prime Minister will have to answer a financial “black hole” that could be as large as £60bn – which may require up to £35bn of spending cuts and an extra £25bn raised through taxation…reports Asian Lite News

Jeremy Hunt will unveil his autumn statement on Thursday, where he will attempt to find up to £60bn from a combination of tax hikes and spending cuts to rebalance the books.

Both the chancellor and Prime Minister Rishi Sunak have warned that “difficult decisions” will need to be made in order to restore the UK’s economic credibility.

But speculation continues about what exact measures will form the autumn statement.

A report from the Resolution Foundation economic think tank has suggested Sunak and Hunt face a thankless task to rebalance the nation’s finances, with at least £40bn needing to be found by the government.

Treasury sources said the financial “black hole” could be as large as £60bn – which may require up to £35bn of spending cuts and an extra £25bn raised through taxation.

Minimum wage

Britain has a legal minimum wage which all firms should pay and all workers should receive which goes up every April.

With the cost of living soaring, there have been calls for the government to increase the minimum wage – officially known as the National Living Wage – by more than was planned in the autumn statement.

At present, the National Living Wage for over-23s is £9.50 an hour, for those aged 21-22 it is £9.18, for those aged 18-20 it is £6.83 and for those under-18 or apprentices it is £4.81.

The rates are the same across all parts of the UK.

Hunt will announce a rise in the National Living Wage for over-23s from £9.50 an hour to about £10.40 an hour.

The rise of nearly 10% would benefit around 2.5 million people, the original report in The Times said.

The newspaper also reports that eight million households will receive cost of living payments worth up to £1,100 a year.

Council tax

The Daily Telegraph has reported the government is also considering removing the requirement for local authorities to hold a referendum before increasing council tax by more than 2.99%, allowing them to raise significantly more money.

The new threshold could be 5%, according to the newspaper, which would see households in Band D paying up to £100 extra.

It could also mean that average council tax bills exceed £2,000 a year for the first time.

Under present rules, councils responsible for social care are allowed to increase their bills by 2.99%, including a 1% levy for social care.

If a local authority wants to raise bills any further, it must hold a local referendum.

But under new plans expected to be unveiled in the autumn statement, the maximum amount councils can increase bills without holding a referendum is expected to rise to 4.99% to help pay for social care.

Most councils are expected to take advantage of the freedom to charge residents more.

The Conservative Party manifesto in 2019 pledged to keep a veto on large council tax rises, insisting local people would “continue to have the final say”.

But a Treasury source told the Telegraph that councils need “more flexibility” to raise money.

The Telegraph has also suggested that the chancellor is considering plans to reduce the amount of funding received by councils for some of the services for refugees hosted by UK families.

Freezing tax thresholds

In the 2021 spring budget, Sunak, who was chancellor at the time, froze personal tax thresholds, which meant more low-income households had to pay the basic rate of income tax while those with earnings nearing £50,000 were made to pay the higher 40% rate.

The freezes were at the time forecast to last five years and raise billions for the Treasury by 2026, but it is thought this could be extended to 2028.

The Conservative Party’s winning 2019 manifesto promised to keep taxes low, so prolonging the freeze in the threshold at which workers start paying taxes is politically delicate ground for Mr Sunak’s government

However, it would send a signal the UK is committed to balancing its books over the long term.

Income tax

As chancellor, Sunak also promised to cut the basic rate of income tax to 19% in April 2024 and then to gradually reduce it to 16% by 2029.

While Truss’s government had said it would cut 1p of the basic rate of income tax from April 2023 – given the great need to cut the country’s debt, it is unclear whether or not this will be a pledge that is kept.

The Telegraph newspaper has suggested Hunt is planning on reverting to Sunak’s initial policy and planning a delay in the cut to the basic rate of income tax until 2024.

The cut could be completely off the table, however the Conservative Party’s commitment to keeping taxes low where possible suggests this is a less likely outcome.

The paper has also reported that ministers have discussed slashing the rate of income tax relief that is applied to higher rate taxpayers from 40p to 20p – which would mean millions of higher rate taxpayers could face paying more income tax.

Officials are also said to have discussed raising the top rate of income tax – which was 50p until it was abolished by former chancellor George Osborne in 2013.

But this is believed to be a less likely path for Sunak and Hunt to choose to go down.

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Hunt Hints ‘Tax Pains’ Ahead For All

The chancellor said his plan will help get the UK out of a recession as quickly and with as little pain as possible as he also promised help for energy bills not just this winter, but next…reports Asian Lite News

Jeremy Hunt has said everyone is going to be paying higher taxes but those who earn the most will have to make larger sacrifices.

The chancellor said during Thursday’s autumn statement he “will be asking everyone for sacrifices” but recognises there is “only so much we can ask” from people on the lowest incomes.

“That will be reflected in the decisions that I take, that’s important because Britain is a decent country, a fair country, a compassionate country,” Mr Hunt said.

“We’re all going to be paying a bit more tax, I’m afraid.”

Ministers are understood to be considering lowering the threshold at which employees pay the highest 45p rate of income tax from £150,000 to £125,000, the Sunday Telegraph reports.

Nurses across the UK this week voted to go on strike for the first time, likely next month, as they demand a 17% pay rise.

Hunt, who was health secretary when junior doctors went on strike for the first time in 2015, said he was “very conscious” of nurses’ concerns and understands they are asking for that above-inflation increase because of the impact of inflation on their pay packet.

But he said: “I think we have to recognise a difficult truth that if we gave everyone inflation-proof pay rises, inflation would stay. We wouldn’t bring down inflation.

“And that’s why, you know, I’m not pretending there aren’t some difficult decisions. The way through this is to bring down inflation as quickly as possible, because that is the root cause of your concern, your anger, your frustration, that your pay isn’t going as far as it might.”

Hunt promised the autumn statement will “not just be bad news” but said he believes the public recognises “if you want to give people confidence about the future you have to be honest about the present”.

He said his plan will be both short and long-term and will bring down inflation, control high energy prices and “get our way back to growing, healthily”.

The chancellor said his plan will help get the UK out of a recession as quickly and with as little pain as possible as he also promised help for energy bills not just this winter, but next.

But he also said spending cuts from government departments will be needed and hinted no more funding will be given to the NHS.

He said the health service’s funding is already going up but the government needs to do “everything we can to find efficiencies” within the NHS.

Hunt, asked if the NHS is on the brink of collapse, admitted doctors and nurses “on the frontline are frankly under unbearable pressure so I do recognise the picture”.

He added that public services need a strong economy but that applies the other way around as well.

And he said the NHS can help get the UK out of the current economic difficulties, such as helping the growing number of people out of work due to long-term sickness.

Simon Clarke, the former levelling up secretary under Liz Truss, told Sophy Ridge on Sunday he would rather see public spending cuts than tax rises in the fiscal statement.

He said: “I would strongly urge that the great balance of this statement should come from spending reductions because I really do think that there is an issue with our raising the burden of taxation on Britain at this time.”

Clarke added that government spending has risen “substantially” over the past decade so there is “potential” to make savings that “did not damage public services”.

Labour’s shadow chancellor Rachel Reeves said the chancellor could still make “fair choices” in the autumn statement that do not place the burden on the public by closing tax loopholes and backdating the windfall tax on energy companies’ profits to January and extending it by two years.

She said the windfall tax extension could raise an additional £50bn.

Reeves also called for a general election as she said Prime Minister Rishi Sunak has “no mandate for the cuts and tax increases” because he was not voted in by the country, but by Conservative MPs.

ALSO READ-Hunt warns of ‘tough road ahead’ for UK economy

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Hunt plans £10 billion tax rule changes

Jeremy Hunt

Increasing the number of very high earners whose income relief is cut further is another option being considered, the report said…reports Asian Lite News

Chancellor Jeremy Hunt is considering changing income tax rules which are designed to encourage workers to save into their pension pots, the Telegraph reported.

Talks are underway to reduce the rate at which income tax relief is applied to Britain’s higher-rate taxpayers from 40 pence to as low as 20 pence, according to the Telegraph. Increasing the number of very high earners whose income relief is cut further is another option being considered, the report said.

The total cost of pension tax relief to the Exchequer is £42.7 billion, of which £22.9 billion is relief on income tax. A flat rate of 20% would raise between £8 billion to £10 billion a year, according to a report by the Pension and Lifetime Savings Association.

It marks the resurrection of a plan first pitched by former chancellor George Osborne in 2016, which was abandoned by the Conservative Party. The Telegraph last week reported that Osborne had been approached by Hunt for advice on how to handle Britain’s economy.

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Britain faces tax rises, spending cuts

Sunak is also said to be considering freezing international aid for two years and cutting investment spending…reports Asian Lite News

Everyone in the country will need to pay more in tax in the coming years to fix a hole in public finances, a source in the finance ministry said on Monday, following a meeting between Prime Minister Rishi Sunak and finance minister Jeremy Hunt.

Hunt is due to present a fiscal statement on Nov. 17 which will be accompanied by the first growth and borrowing forecasts since March from Britain’s Office for Budget Responsibility.

“It is going to be rough. The truth is that everybody will need to contribute more in tax if we are to maintain public services,” a Treasury source said.

“After borrowing hundreds of billions of pounds through COVID-19 and implementing massive energy bills support, we won’t be able to fill the fiscal black hole through spending cuts alone,” the source added.

Sterling fell to a record low against the U.S. dollar and the Bank of England was forced to intervene in the bond market in the days after Hunt’s predecessor Kwasi Kwarteng set out 45 billion pounds of unfunded tax cuts on Sept. 23.

The debacle led to Liz Truss resigning as prime minister and being succeeded by Sunak, who had earlier lost out to her in August’s Conservative Party leadership election, partly because he was less keen to promise immediate tax cuts.

Britain’s economic prospects have dimmed since March due to surging inflation, weaker growth and higher borrowing costs.

Economists estimate the government will still have to find tens of billions of pounds of savings or tax rises over the medium term to keep the public finances on an even keel, even if Truss and Kwarteng’s tax cuts are fully reversed.

A Treasury source did not put a figure on what they called “the fiscal black hole”, but the BBC has previously been told it may need to be at least £50bn.

“It is going to be rough,” the source said. “The truth is that everybody will need to contribute more in tax if we are to maintain public services.”

The source said, given the scale of borrowing for energy bills support and the Covid-19 pandemic, “we won’t be able to fill the fiscal black hole through spending cuts alone”.

The Treasury said: “Given the eyewatering size of the fiscal black hole, the PM and the Chancellor agreed that tough decisions are needed on tax rises, as well as on spending.”

Few concrete details of the government’s plans have emerged, but a Treasury source told the Daily Telegraph that Hunt is planning to fill the budgetary shortfall through a combination of 50% tax rises and 50% cuts to public spending.

While the Treasury said Hunt and Sunak “agreed on the principle that those with the broadest shoulders should be asked to bear the greatest burden,” it warned that “given the enormity of the challenge, it is inevitable that everybody would need to contribute more in tax in the years ahead”.

The government has sought to brace the public for the impending change of direction. As he entered Downing Street last week, Mr Sunak warned the public that a “profound economic challenge” lay ahead in the coming months.

And last month, Hunt said the government would have to take decisions of “eye-watering” difficulty to restore faith in public finances.

The size of the fiscal shortfall has shrunk slightly since Hunt reversed most of the measures introduced by former Prime Minister Liz Truss in her September mini-budget. At the time, the Institute for Fiscal Studies estimated the shortfall could be as much as £62bn.

The government had delayed Hunt’s fiscal statement until 17 November in the hope that the economic outlook would improve.

Despite this, the Office for Budget Responsibility (OBR) could still predict a recession next year, with GDP forecasts cut by up to 4% by the end of 2024.

Other measures reportedly under consideration by the government include ending the pensions triple lock and stopping benefits rising with inflation, moves which could save the government up to £9bn.

But increases to the rates of income tax, National Insurance and VAT are understood to have been ruled out by the pair.

In a new report, the Resolution Foundation think tank predicted that many of the options facing the government would be “unpalatable”, as more people could be pushed into the higher 40% rate of tax in a bid to make up the shortfall.

Sunak is also said to be considering freezing international aid for two years and cutting investment spending.

But analysts have already warned that there remains little scope for further cuts to public spending after years of austerity under Conservative governments.

Such moves could also cause Sunak considerable political headaches. His Defence Secretary Ben Wallace – who is widely popular with Conservative Party activists – has already threatened to resign if defence spending doesn’t rise to 3% of GDP.

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Truss rules out new taxes

Truss, who is the bookmakers’ favorite to succeed Boris Johnson, made the commitments at the Conservative Party leadership hustings in London, ahead of the victor being announced on Monday…reports Asian Lite News

Liz Truss ruled out introducing any new taxes or rationing energy this winter if she becomes the UK’s next prime minister, making two eye-catching pledges in her final pitch to win the post.

Truss, who is the bookmakers’ favorite to succeed Boris Johnson, made the commitments at the last Conservative Party leadership hustings in London on Wednesday, ahead of the victor being announced Sept 5.

Truss was asked if she’d make a “read my lips” promise not to raise taxes in government, a reference to a famous pledge made — and then broken — by former US President George H. W. Bush. She replied: “Yes. No new taxes.” She specifically ruled out introducing any new windfall taxes on the energy sector.

Should she win the race for 10 Downing Street, Truss will have to confront a looming economic crisis in Britain, with households facing a record squeeze on the cost of living amid a surge in energy prices. Truss is planning an emergency mini-budget within her first month in office but is yet to detail an extensive plan for how she’d ease the pain.

Britons are set for the biggest squeeze on their living standards in a century unless the next prime minister delivers tens of billions of pounds of extra support, according to new analysis published by the Resolution Foundation think tank on Thursday.

“If the government does want to substantially cut the price of energy faced by households, then it should look to offset some of the cost with increases in taxes, particularly on better-off households,” Resolution Foundation Chief Economist Mike Brewer told Bloomberg Radio on Thursday.

Truss’s opposition to a further windfall tax on extraordinary profits linked to high gas prices caused by Russia’s war in Ukraine may come under pressure in the coming months. The UK Treasury forecasts as much as £170 billion of profit for gas producers and electricity generators over the next two years, according to a person familiar with the matter. Johnson’s Tories introduced an initial 25% levy on the profits of oil and gas firms in May after months of pressure from the opposition Labour Party.

Labour is arguing for a freeze on energy bills in the UK this winter, funded by an expanded windfall tax. Without new taxes, Truss will need to lean on extra government borrowing or cuts to spending elsewhere to finance further household support. Former Bank of England Deputy Governor Charlie Bean said Wednesday that investors are starting to see UK assets as more risky because of signals coming from Truss about her plans to cut taxes and raise spending.

The UK government is also planning to offer fixed-price contracts to more renewable-energy producers as a way to cap profits without imposing a windfall tax, people familiar with the plans told Bloomberg.

And even as the British government works on contingency planning to secure energy supplies for the winter — under a worst-case scenario officials predict blackouts — Truss ruled out the prospect of needing to ration energy, without giving further details. Her leadership rival, Rishi Sunak, said nothing could be ruled out.

“Many European countries are looking at how we can all optimize our energy usage,” Sunak said at the hustings at Wembley Arena in London. “That is a sensible thing for us to be doing as a country.”

Truss also signaled that she would look at reforming business rates, a form of property tax on commercial premises. Bloomberg reported Wednesday afternoon that she was weighing a cut to rates.

The winner of the Conservative Party leadership race will be announced on Monday and they will formally become prime minister after seeing the Queen on Tuesday.

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