Chancellor Jeremy Hunt prepares to announce Britain’s toughest budget in decades

The chancellor manages to raise a smile ahead of the budget later today (Picture: PA Wire)

Chancellor Jeremy Hunt manages to raise a smile – despite preparing to deliver a double dose of painful tax rises and big public spending cuts in Britain’s toughest Budget for decades today.

He aims to plug a £60billion economic black hole caused in part by his predecessor Kwasi Kwarteng and ex-prime minister Liz Truss’s mini-budget two months ago.

Mr Hunt will tell MPs his ‘difficult decisions’ are needed to keep mortgage rates low and tackle energy and food prices – soaring after the pandemic and Russia’s war in Ukraine. ‘We aren’t immune to these global headwinds,’ he will add. ‘But, with this plan for stability, growth and public services, we will face into the storm.’

Alongside his autumn statement, the Office for Budget Responsibility will publish forecasts said to be bleak, with the economy on the brink of recession.

Mr Hunt’s Budget debut comes a day after inflation hit a new 41-year high of 11.1 per cent in October – up from 10.1 percent a month before and highest since 1981.

Grim data showed food inflation hit 16.2 per cent, with big rises on staples such as milk, cheese and eggs.

Housing costs also rose to 9.6 per cent – the highest since 1980. Gas bills have
surged 130 per cent in a year, and electricity 66 per cent. The Bank of England
is expected to raise interest rates again – from three per cent to 3.5 per cent – next month to rein in inflation.

Jeremy Hunt’s budget comes following Kwasi Kwarteng’s mini budget in September, pictured here with Liz Truss (Picture: Rex)

Mr Hunt has already said a two-year £2,500 energy bills cap brought in by Ms Truss during her chaotic 49-day spell as prime minister will now end in April, with support then targeted to the poorest.

Her chancellor Mr Kwarteng’s unfunded tax-cutting mini-budget on September 23 – on top of the energy package – spooked markets, leading to higher government borrowing costs and bigger mortgage payments for millions.

Mr Hunt has already reversed many of its measures. He is likely to retain their axing of the bankers’ bonus cap but may freeze income tax bands and national
insurance thresholds until 2028, drawing more workers into higher bands to raise billions.

Rishi Sunak will travel back from Bali and be present when the budget is announced (Picture: PA WIre)

He is set to lower the 45 per cent top tax rate threshold from £150,000 to £125,000.

He is tipped to allow local authorities to raise more council tax, extend a levy on oil and gas profits and has told all ministries to look at spending cuts. But he will promise he is on a mission to ‘protect the vulnerable, because to be British is to be compassionate’.

PM Rishi Sunak has hinted the triple lock on pensions – a guarantee they rise with
the highest of wages, inflation or 2.5 per cent – may not be scrapped as pensioners were at the ‘forefront’ of his mind.

Mr Sunak – due in the Commons for the Budget after flying back overnight
from the G20 summit in Bali – said the economic situation was ‘the thing causing
most anxiety. Opening up bills, the emails come in with rising prices. That’s why
it’s right we grip it.’

Frances O’Grady, TUC general secretary, said family budgets were being shredded as the cost of food and energy skyrockets’.

Shadow chancellor Rachel Reeves said: ‘The country is being held back by 12 years of Tory economic failure and wasted opportunities, and working people are paying the price. What Britain needs in the autumn statement today are fairer choices for working people, and a proper plan for growth.’

Amid the gloom, a top analyst said he thought inflation had peaked and food prices would fall next year.

Martin Beck, chief economic adviser to the EY Item Club, predicted interest rates would fall back after hitting a high of four per cent early in 2023.

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‘Difficult decisions’ are needed to keep mortgage rates low and tackle energy and food prices