Rishi Sunak is expected to increase welfare and pension payments in line with the rise in inflation in order to make sure the budget is “fair and compassionate”. These pledges are set to cost a combined £11billion in 2023-24.
The Prime Minister and Mr Hunt are reportedly “instinctively opposed” to breaking their promise on pensions benefits, meaning the money must be made up through other methods such as increasing taxes and cutting public spending.
Mr Sunak told The Times at the weekend: “You will rightly be able to judge, is that [the autumn budget] a fair approach, is that a compassionate approach?
“I’m confident that people will feel that it is but I don’t want to pre-empt what the chancellor is going to say.”
Many Tory MPs have expressed their strong opposition to not increasing benefits in line with inflation, including Levelling Up Secretary Michael Gove and Work & Pensions Secretary Mel Stride.
They fear that raising benefits in line with wages would actually lead to cuts in many benefit payments and have warned against balancing the books “on the backs of the poorest”.
Increasing benefits in line with inflation is projected to cost £5billion, while another Tory pledge to protect the pension triple lock will cost about £6billion.
Both items were included on a list sent to the Office for Budget Responsibility (OBR) over the weekend.
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Another move forecast to raise £500million is the freezing of the “nil rate band” of inheritance tax — the rate at which people start paying the levy — for another two years until 2028, according to the Financial Times.
Other plans include freezing income tax thresholds until 2027-28 so that more people are pushed into the higher rate of 40p.
The Prime Minister and Chancellor are also likely to freeze the pensions lifetime allowance for another two years.