Jeremy Hunt’s Halloween budget could hit high earners with £20bn of tax rises

Jeremy Hunt is considering up to £20 billion of tax rises in the Halloween budget, with high earners to bear the brunt of his quest to balance the books. 

The Chancellor has been told by the Office for Budget Responsibility (OBR) that there is still a £40 billion black hole in the nation’s finances, even after he axed almost all of the mini-Budget. 

He is looking to raise as much as half that amount from putting up taxes, reducing the need for painful and highly controversial cuts to public spending. 

Mr Hunt could seek to reform generous capital gains rules and bring them more into line with general taxation, bringing in around £3.5 billion a year. 

He is also looking at ditching the two-year removal of green levies from energy bills, which is being subsidised by the Treasury, and reintroducing them next April. 

Liz Truss repeatedly hailed the move as one of her flagship cost of living policies and said it would save 28 million households around £150 a year. 

The Chancellor is mulling axing the Prime Minister’s commitment to increase defence spending to three per cent of GDP, which would save £15 billion.

That would leave him needing to find up to £15 billion in tax rises, with Government sources saying they will fall on those with the broadest shoulders. 

Mr Hunt is not considering measures that would hit the poorest Britons who are already struggling with rising prices, such as a rise in fuel duty. 

One way he could find the money would be to reintroduce the National Insurance rise, which would raise £15 billion - but that is politically highly unlikely. 

The Chancellor could also revisit the plan to increase stamp duty thresholds, the only other measure to survive from the mini-Budget - finding £2 billion. 

One move, as called for by Labour, would be to abolish non-dom status. That would bring in an extra £3 billion a year to the Exchequer. 

There are also a raft of wealth taxes Mr Hunt may look at, such as a council tax surcharge on properties worth over £2 million that would raise £1.4 billion.

He could adopt Sir Keir Starmer’s proposal for a further windfall tax on energy producers to drum up a further £8 billion, though that would only be a temporary fix.

Mr Hunt may keep the surcharge banks pay on their profits at eight per cent, meaning they will face an effective corporation tax rate of 33 per cent from April. 

Rishi Sunak had promised to cut it to three per cent, but reversing his decision would raise well over £500 million a year and have the bonus of being politically popular. 

One controversial option would be for the Government to cut the amount of interest it pays out to commercial lenders who have deposits at the Bank of England. 

The move has been proposed by Paul Tucker, a former deputy governor at the central bank, and would save up to £90 billion over the next two years. 

But it would act as an extra tax on banks and risks being seen as an interference in the Bank of England’s independence, and as such is not thought likely to be pursued.

George Osborne, when implementing the austerity measures of the David Cameron years, favoured an 80-20 split of spending cuts to tax rises. 

Mr Hunt is believed to feel such cuts are no longer viable, and has had Treasury officials exploring options for a divide as even as 50-50.

But getting such a high level of tax rises past Tory MPs, many of whom supported the Prime Minister’s economic agenda, may prove too difficult. 

The OBR is expected to deliver its final forecast, which will detail the impact the fiscal statement will have on the public finances, to the Chancellor over the weekend. 

He will then discuss it with the new Prime Minister, who will have to decide whether to go ahead with the Halloween budget as planned or postpone it. 

Mr Hunt will urge whoever wins the Tory leadership to stick to the date, arguing a delay would further add to the market uncertainty hanging over Britain. 

But doing so would mean they will have almost no chance to put their own personal stamp on the Government’s economic plan or change what he has drawn up.