Jeremy Hunt and Rishi Sunak meet to discuss UK finances in Downing Street (Picture: No.10 Downing Street/Simon Walker)

Higher taxes and a squeeze on ­public spending are on the cards to fill a ­£40billion black hole in UK finances.

Prime minister Rishi Sunak and chancellor Jeremy Hunt are expected to extend a freeze on the thresholds at which people start to pay the different rates of income tax and national insurance, which could result in more people entering higher tax bands as wages rise.

Mr Hunt will set out his plans in full in the Autumn Statement on November 17.
Public sector workers could face deep real-terms cuts to wages, with The Times reporting that the Treasury is looking at a pay increase of two per cent across the board for 2023-24, at a time when ­inflation is expected to be well above that.

A Treasury source said no decisions have been taken, adding that the ­‘independent pay review body process takes place next year’.

After BP unveiled profits of £7.1billion in the three months to September, pressure is growing for a windfall tax on oil and gas giants to help fill UK coffers.

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Cop26 president Alok Sharma, no longer a minister under Mr Sunak, said: ‘We need to raise more money from a windfall tax on oil and gas companies and actively encourage them to invest in renewables.’

The Resolution Foundation think tank yesterday released a report outlining the ‘unpalatable’ choices on the table.

At an event launching the analysis, former Bank of England deputy ­governor Sir Charlie Bean warned that ‘all the low-hanging fruit’ had already been picked on public spending.

Rachel Wolf, who co-authored the 2019 Conservative manifesto, said: ‘It is almost impossible, at this point, to go back to its central promises.’

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Public sector workers could face deep real-terms cuts to wages.