Most of the extra revenue will come from freezing tax thresholds, it is understood. The levy on energy firms is also set to rise and last for another six years. Spending cuts of about £35bn and plans to raise some £20bn in tax are expected to be set out. Independent forecasts have identified a gap of around £55bn in the public finances. Government departments are expected to be told their budgets must rise by 1% every year until 2025.
A higher levy on the profits of energy firms could also run that long - rather than as a one-off windfall tax. The implications of these plans are that the Conservatives will go into the next election promising a less generous version of the state. One former minister on the right suggested it was a big mistake to increase taxes. And the Tories are likely to face significant political problems with sections of the public. Increasing taxes could hurt at a time when millions are already really finding it hard to make ends meet.
Rishi Sunak replaced Liz Truss as prime minister last month with a vow to undo her economic policy mistakes. His budget plan will include forecasts similar to those of the Bank of England which warned of long recession ahead. The Times reports Hunt is likely to commit only 20 billion pounds to extend the government's energy bills cap after April. But he is considering a multi-billion-pound package to shield pensioners and benefit claimants from higher power bills.
The choices made by Health Secretary Jeremy Hunt and Prime Minister Rishi Sunak will determine how far Britain can weather that storm. A lengthy recession is now likely under way, and inflation numbers for October are due on Wednesday. The new government has two years left to restore perceptions of the ruling Conservative Party's economic competence. In the meantime, the Bank of England is likely to keep raising interest rates to bring inflation under control. Clues on its intentions may emerge on Wednesday as Governor Andrew Bailey testifies in Parliament alongside three of his colleagues and we will get more information on the Inflation Report Hearings.
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