The warning from a Treasury source comes after Chancellor Jeremy Hunt and Prime Minister Rishi Sunak met yesterday morning. They discussed what has been described as an eye-popping black hole and agreed that tough decisions will be needed on tax increases as well as spending. Politics Live: COVID campaigners call on Matt Hancock to retire from reality TV The tax increases are likely to be across the board, although the pair agreed that those with the “broadest shoulders” should bear the brunt, it is understood. The source said: “It’s going to be rough. The truth is that everyone will need to contribute more in tax if we want to maintain public services. “After borrowing hundreds of billions of pounds through COVID-19 and implementing massive energy bill support, we won’t be able to fill the fiscal black hole with spending cuts alone.” The source did not give figures for the “black hole”, but the Resolution Foundation think tank has estimated that at least £40bn should be found as part of the fallout from Liz Truss’s disastrous mini-budget and warned tax rises. likely’ to come soon. Mr Hunt will set out his plans in the Autumn Statement on November 17 and is said to be considering splitting the burden equally between tax rises and spending cuts. Use Chrome browser for more accessible video player 2:50 Ed Conway discusses Prime Minister Rishi Sunak’s warning that the country is facing a “deep” economic crisis. Few concrete details have emerged but, according to the Times, public sector workers could face severe real-term pay cuts, with the Treasury reportedly considering a 2% rise across the board for 2023-24. at a time when inflation is expected to be well above this limit. A finance ministry source told the PA news agency that “no decisions have been made” and that “the independent wage review body process will take place next year”. With BP revealing profits doubled to more than £7.1bn in the quarter to September, pressure continues to mount for an enhanced windfall tax on the oil and gas giants to help fill the Department’s coffers Finance. COP26 chairman Alok Sharma, who was demoted from the cabinet by Mr Sunak, supported the move, saying: “We need to raise more money from a windfall tax on oil and gas companies and actively encourage them to invest in renewable energy sources”. Rishi Sunak told his cabinet on Tuesday that the NHS will be a “priority” as tough spending decisions are made, No 10 said. A recession next year could be predicted by the independent government forecaster, the Office for Budget Responsibility, the Resolution Foundation said, and GDP forecasts could fall by as much as 4% by the end of 2024. Read more: Liz Truss investment zones ‘under review’ Jeremy Hunt delays Halloween financial statement Among the “menu” of options the chancellor is opening up are cuts to investment spending, a move which the Resolution Foundation says could save £10bn but would also have a damaging impact on growth. The thinktank also suggests the government could try to choose the so-called “austerity option” – but that would require cuts to already squeezed departmental budgets. Meanwhile, £9bn could be saved by choosing not to raise benefits and pensions in line with rising prices next year, but any such move would have a “huge” impact on those already struggling to make ends meet. Another option would be to bring back the health and social care levy to raise £15bn by 2026-27, while around £2bn could be raised by extending the ‘thief’ freezes on the income tax threshold by one more year to 2026-2027.
