The chancellor and prime minister are putting together a painful budget (Picture: Downing Street)

‘Rough’ tax rises for all look to be on the way as the government battles with a £50bn blackhole in the country’s finances. 

With two-and-a-half weeks ago until the Autumn Statement, Rishi Sunak and Jeremy Hunt are looking for ways to balance the books after a period of financial turmoil.

The chancellor wants to meet the shortfall with a 50/50 mix of cuts and tax rises, according to The Telegraph.

Public sector pay may be targeted and workers offered a 2% pay cut across the board, a massive real terms pay cut against the backdrop of double-digit inflation.

He is also reportedly set to freeze the thresholds at which people start to pay income tax and national insurance, an effective rise for many.

Mr Hunt has previously instructed all cabinet ministers to identify ‘efficiency savings’ in their own government departments.

An unnamed Treasury source told the paper: ‘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.

Rishi Sunak, reputedly the wealthiest man to hold the office of PM, was seen moving in to Downing Street over the weekend (Picture: Reuters)

‘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 Resolution Foundation think tank has set out some of the options on the ‘unpalatable menu’ available to the government.

Investment spending could be slashed by £10 billion, but that would have a knock-on effect on growth ahead of a year in which a recession is likely.

The ‘austerity option’ would involve slashing budgets at departments already cut to the bone but the group warned ‘it is hard to see how the Treasury could credibly save more than £20 billion by announcing cuts to day-to-day public service spending’.

The government has already performed a huge U-turn on most of the mini-budget but there is still more pain to come (Picture: Reuters)

It remains to be seen if Mr Hunt and Mr Sunak ‘go full circle’ by reinstating the health and social care levy.

The national insurance rise, which would raise £15 billions by 2026-27, was announced by the PM when he was the chancellor but scrapped in Liz Truss’ disastrous mini-budget.

The Resolution Foundation’s James Smith said: ‘History tells us that this will involve cuts to public investment, which are easy to announce but reduce growth in the longer term.

‘Further austerity for public services is also likely, but there are limits to how big these can credibly be, as public services are already facing cuts of £22 billion thanks to high inflation.

‘This reality means that the Autumn Statement is likely to involve tax rises, not just spending cuts.’

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The prime minister and chancellor are putting together a painful economic statement for November 17.