More Britons will pay higher rates of tax after the autumn state as Jeremy Hunt announce he was freezing allowances for two further years and cutting the threshold for the 45p top rate.
The chancellor said cutting the starting point for the top rate from earnings of £150,000 to £125,140 would see the wealthiest paying an extra £1,200 each year.
The decision to freeze the earnings figure at which the 20p and 40p rate will see many more Britons paying tax or paying higher rates.
Unveiling £55bn of spending cuts and tax increases, Mr Hunt insisted he was ensuring “those with more contribute more” and that his tax hikes would avoid “damaging growth”. Although the rises are “substantial”, the percentage of GDP taken in tax would rise by only one per cent over five years, he said.
The chancellor also confirmed that £4bn-a-year cuts to overseas aid will continue indefinitely, instead of returning to its target of 0.7 per cent of national income.
He confirmed the budgets of most Whitehall departments will not be increased in line with rampant inflation, despite being set when prices were rising by around 3 per cent, not 11 per cent.
But he made an exception for education, announcing it would receive an extra £2.3bn a year, when further cuts were feared.
Tax allowances had already been frozen until 2026, but that will now continue until 2028 as Mr Hunt seeks to cover “just under half” of his cost savings from tax hikes.
The cutting of the 45p threshold is a stunning reversal of Kwasi Kwarteng’s proposal to axe it altogether in his disastrous mini-Budget.
“I understand the motivation of my predecessor’s mini-budget and he was correct to identify growth as a priority. But unfunded tax cuts are as risky as unfunded spending,” Mr Hunt told MPs.
“Anyone who says there are easy answers is not being straight with the British people: some argue for spending cuts, but that would not be compatible with high-quality public services.
“Others say savings should be found by increasing taxes, but Conservatives know that high tax economies damage enterprise and erode freedom.
“We want low taxes and sound money. But sound money has to come first because inflation eats away at the pound in people’s pockets even more insidiously than taxes.
“So, with just under half of the £55n consolidation coming from tax, and just over half from spending, this is a balanced plan for stability.”