• The government faces a £50bn budget gap.
• 50/50 cuts and tax increases needed to cover the shortfall.
• Public sector workers may be handed a 2% salary decrease.

As the government faces a £50bn budget gap, “rough” tax increases for everyone are likely.

Rishi Sunak and Jeremy Hunt have two-and-a-half weeks until the Autumn Statement to find solutions to balance the budget after financial turbulence.

According to The Telegraph, the chancellor aims to cover the difference with 50/50 cuts and tax increases.

Against double-digit inflation, public sector workers may be handed a 2% salary decrease.

He may also lock income tax and national insurance thresholds, thus raising them for many.

Mr. Hunt ordered all cabinet ministers to find “efficiency savings” in their departments.

The Treasury told the paper: ‘It is going to be hard.

To sustain public services, everyone must pay greater taxes.

‘After borrowing hundreds of billions of pounds through Covid-19 and introducing substantial energy bills support, we won’t be able to plug the budget black hole through spending cutbacks alone.’

The Resolution Foundation has listed some of the government’s “unpalatable menu” alternatives.

£10 billion in investment cuts would hurt growth in a recession-prone year.

The “austerity option” would decrease budgets at departments already underfunded, but the group said “it is hard to see how the Treasury could legitimately save more than £20 billion by declaring changes to day-to-day public service spending”.

Sir Charlie Bean, former Bank of England deputy governor and OBR forecaster, told a think tank gathering that savings were unlikely.

‘Governments have to realize they can’t do this via efficiency savings,’ he said.

‘Austerity took all the low-hanging fruit.

You can only reduce expenditure if you modify your image of the public sector.

We should debate that.

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