Rishi Sunak admits ‘difficult things’ needed to get economy back on track amid rumoured tax hikes

But chancellor promises he won’t deliver a ‘horror show’ of never-ending increases

Rishi Sunak has given his strongest indication yet that tax hikes are coming, as he warned Conservative MPs that he will have to do “difficult things” to get the UK’s finances back into order after the coronavirus pandemic.

But the chancellor promised there would not be “a horror show of tax rises with no end in sight”.

Tory backbenchers have responded with alarm to a series of newspaper stories suggesting that the Treasury is considering hikes to a range of levies – from corporation tax, capital gains tax, fuel duties and national insurance to a reduction in pension tax relief and the abolition of the pensions triple lock – in November’s Budget.

Unconfirmed reports in The Sun today claimed that he was considering raising the class 4 rate of National Insurance contributions for the self-employed from 9 per cent to match the 12 per cent rate for employees, at an average annual cost of £200. Earlier reports also suggested he was considering putting fuel duty up by 5p a litre.

An insight into his priorities was revealed when a photographer snapped the briefing notes he was carrying for a meeting with Tory MPs from the 2019 intake to parliament.

“We will need to do some difficult things, but I promise you, if we trust one another we will be able to overcome the short-term challenges,” the chancellor said.

“Now this doesn’t mean a horror show of tax rises with no end in sight.

“But it does mean treating the British people with respect, being honest with them about the challenges we face and showing them how we plan to correct our public finances and give our country the dynamic, low-tax economy we all want to see.

“We cannot, will not and must not surrender our position as the party of economic competence and sound finance. If we argue instead that there is no limit to what we can spend, that we can simply borrow our way out of any hole, then what is the difference between us and the Labour Party.”

The prime minister, Boris Johnson, told the meeting, involving many of the Tory MPs who snatched so-called red wall seats from Labour in the north and the Midlands in December: “I know it’s been tough. I’ve got to warn you it’s about to get tougher.

“The waters are about to get choppier. But we are going to deal with it.”

Reports last weekend suggested that Mr Sunak is planning a £30bn tax raid in November’s Budget to start paying off money that was borrowed to fund his wallet-busting response to Covid-19, including the £60bn job retention scheme support for furloughed workers.

But businesses and backbench MPs have cautioned against bringing revenue-raising measures forward too soon – a move that the British Chambers of Commerce warned could “hamstring the recovery” after the record 20.4 per cent slump in GDP in the second quarter of 2020.

And the director of the Institute for Fiscal Studies, Paul Johnson, said Mr Sunak should wait up to two years until the recovery is well under way before raising taxes. By that point, “pretty substantial” increases will be required in major levies such as income tax, national insurance and VAT, he suggested.

Labour said it was “the wrong time to be talking about tax rises”.

A spokesman for Sir Keir Starmer, the opposition leader, told reporters: “With the health crisis still not under control and the deepest economic crisis we have faced in generations, this is absolutely the wrong time to be talking about tax rises.

“The government should be focused on getting the economy growing again, not briefing against one another and floating ideas for new tax rises.