All Britons are facing years of tax hikes in a bid to balance the country's books, it emerged today.
The Telegraph says that UK Prime Minister Rishi Sunak and Chancellor Jeremy Hunt have decided to bring in "stealth" increases in Income Tax and National Insurance over the coming years by freezing the thresholds at which people start to pay different rates.
They agreed that tough decisions would be needed on tax rises, given the "eye-watering size" of the £40billion fiscal black hole.
The two leading Tory politicians are said to be eyeing a mixture of tax rises and spending cuts to raise more than £50billion.
This cash will be used to plug the gap in the Office for Budget Responsibility forecasts and also create at least £10billion of fiscal headroom to allow for a potential downturn in economic growth.
It is believed Mr Hunt is looking at getting half of the money needed from tax rises and the other half from spending cuts.
Ruled out
At yesterday's meeting to plan this month's much-anticipated autumn budget, Mr Sunak and Mr Hunt are understood to have ruled out increasing the rates of Income Tax, National Insurance and VAT - as to do so would breach the Conservatives' 2019 manifesto.
It was already expected that Income Tax and National Insurance thresholds would be frozen until 2026, but the new plan sees this being extended for two years or even longer.
But the decision not to touch the rates of the three main taxes - on top of the fact that freezing thresholds only saves £5billion a year - raises the prospect that a slew of other taxes may have to be increased across the board to raise billions of pounds more.
It emerged at the weekend that the UK Government is preparing to unleash a second round of windfall taxes on North Sea oil and gas producers as part of its cash-raising plans.
The Sunday Times said that the levy on offshore operators producers could be raised from 25% to 30% and extended by three years to 2028. Officials have also been working on plans to widen the windfall tax to include electricity generators.
The North Sea industry has stressed to the new Prime Minister Rishi Sunak the need for a "sustainable and competitive" fiscal regime. But this message appears to have fallen on deaf ears,
Broadest shoulders
On Monday, the Treasury said that while those with the broadest shoulders should bear the greatest burden, it is "inevitable" that everybody would need to contribute more in tax in the years ahead given the "enormity" of the challenge.
"It is going to be rough," said a source at the Treasury. "The truth is that everybody will need to contribute more in tax if we are to maintain public services.
"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 source said that the PM and Chancellor had reiterated their commitment to continuing to protect the most vulnerable during what will be a "difficult period".
The Budget is to be unveiled on November 17, and it will set out tax and spending decisions over the next five years. It is considered likely that any changes would come in at the start of the next financial year.
John O'Connell, chief executive of the TaxPayers' Alliance, told the Telegraph: "Taxpayers will be horrified by talk of bigger bills to come.
"With the tax burden at a 70-year high, Britons are being expected to bear the brunt of a spiralling cost of government crisis. The chancellor must make significant savings to ease the strain on hard-pressed households."