Jeremy Hunt will on Thursday promise to help the UK economy weather the “economic storm” through an “eye-watering” £54 billion package of tax hikes and spending cuts.
He is expected to tell the House of Commons that his economic plan will put the country “on a balanced path to stability” and tackle the “enemy” of inflation, which soared to a 41-year high of 11.1 per cent on Wednesday.
Facing a backlash over cuts to public services, he will insist his plan is “compassionate” to the most vulnerable in society.
“We aren’t immune to these global headwinds, but with this plan for stability, growth and public services – we will face into the storm,” he will tell the Commons.
As part of his plan, Mr Hunt is expected to impose stealth taxes by freezing the rates at which workers pay higher rates, drawing more into higher brackets as inflation increases.
Alongside this, he is likely to raise the minimum wage and lower the threshold for when the 45 per cent top rate of income tax comes in from £150,000 to £125,000.
He is also expected to press ahead with controversial plans to allow local authorities to further raise council tax without referendums, despite the policy proving controversial in opinion polls. Under current regulations, councils can only put up taxes by 2.99 per cent with another 1 per cent social levy added on unless they hold a referendum on raising it by a further margin.
The energy bill support package will also be modified to target the most vulnerable from April, while a windfall tax on oil and gas giants is expected to be increased and widened to electricity generators.
The Office for Budget Responsibility (OBR) will publish its long-awaited forecasts, which are expected to detail bleak prospects for an economy teetering on a recession.
“Families across Britain make sacrifices every day to live within their means, and so too must governments because the United Kingdom will always pay its way,” Mr Hunt will tell MPs.
“We are taking a balanced path to stability: tackling the inflation that eats away at a pensioner’s savings and increases the cost of mortgages to families, at the same time supporting the economy to recover. But it depends on taking difficult decisions now.”
Economics have blamed the UK’s economic crisis on Vladimir Putin’s invasion of Ukraine, the aftermath of the Covid pandemic, Brexit and Kwasi Kwarteng’s disastrous mini-budget in September. Rising interest rates have caused mortgages to spiral, while the price of energy bills and food have seen record increases in recent months.
The Resolution Foundation calculates that the so-called mini-budget made the financial shortfall £30 billion bigger, while the Bank’s governor Andrew Bailey said it caused a long-lasting “knock” to the UK’s reputation.
Mr Hunt will warn that “high inflation is the enemy of stability” as it sends food and fuel bills soaring, causes businesses to fail and raises unemployment.
“It erodes savings, causes industrial unrest, and cuts funding for public services. It hurts the poorest the most and eats away at the trust upon which a strong society is built,” he is set to say.
Speaking at the G20 summit in Bali on Wednesday, Prime Minister Rishi Sunak insisted that the decisions taken by Mr Hunt would be “based on fairness”.
“They'll be based on compassion and I am confident that when people see the set of decisions... they will see that we have strived incredibly hard to deliver fairness to deliver compassion, and put the UK on a positive economic trajectory.”
Mr Hunt’s statement is expected to trigger a backlash on the Tory right, who supported former PM Liz Truss’s plan of unfunded tax cuts and deregulation.
Simon Clarke, who was in Ms Truss’s Cabinet during her disastrous mini-budget, warned Mr Hunt not to “throw the baby out with the bathwater and overcorrect” by imposing too many tax rises.
“I hope they will strike a balance which leans much more to spending reductions than tax rises to balance the books,” he told BBC Radio 4’s Today programme.
Former cabinet minister Esther McVey said she would not support further tax rises without the scrapping of the “unnecessary vanity project” of HS2.
Reacting to the statement, Labour’s 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.”