Jeremy Hunt statement could trigger huge rises in council tax

Prime minister and chancellor seeking £60bn of tax rises and spending cuts in auserity budget

(Joe Giddens/PA) (PA Archive)

Households could face massive hikes in council tax under a plan understood to be under consideration by Rishi Sunak and chancellor Jeremy Hunt as they struggle to fill a £60bn black hole in the government finances.

Ministers are said to be “thinking the unthinkable” as they try to find a way to balance the books in Mr Hunt’s crucial 17 November Autumn Statement, which is expected to set out an austerity package of spending cuts and tax rises.

With expectations high that they will increase welfare benefits and pensions in line with inflation at a cost of £11bn, the prime minister and chancellor are reportedly looking at a range of tax increases.

However, Westminster observers note that chancellors routinely float punitive tax and spend measures in the media in the days before a budget, in order eventually to be able to present their actual plans as being less brutal than expected.

Ideas floated today include removing the 2.99 per cent cap on annual council tax hikes above which English local authorities are required to hold referendums.

Removal of the cap would clear the way for town halls to impose rises close to the rate of inflation, currently at 10.1 per cent.

With an average annual charge of £1,966 for a Band D property in England, a 10 per cent hike in council tax would add almost £200 to household bills.

Other options under consideration are understood to include an increase in the 45p top rate of income tax for high-earners, potentially restoring it to the 50p level inherited from the Labour government in 2010.

Or Mr Hunt could raise money by lowering the threshold for the top rate below its current level of £150,000 to pull in more high-income workers.

The rate was controversially slashed to 40p by Kwasi Kwarteng in his September mini-Budget only to be restored to 45p days later after a panicked market response.

Mr Sunak and Mr Hunt are already thought to be considering extending the existing freeze on income tax thresholds beyond 2025/6, dragging millions of workers into higher bands as inflation rises.