Jeremy Hunt to hit savers in Budget with tax-free allowance freeze for ISAs despite high inflation

- Advertisement -

Despite high inflation, Jeremy Hunt will hit Budget savers with tax-free allowance freeze for ISAs

  • Millions of savers face cuts as ISA tax-free allowances are frozen
  • Jeremy Hunt will reveal plans tomorrow to raise £54bn to balance the government’s books
  • Economist Gerard Lyons warned that ‘austerity package’ would not help the economy
  • Mr Hunt said people wanted the UK to be ‘a country that pays its way’

<!–

<!–

<!–<!–

<!–

<!–

<!–

Millions of savers face budget tightness today as Jeremy Hunt unveils plans to raise £54bn to balance the government’s books.

Sources in Whitehall said tax-free allowances for ISAs and other savings products would remain frozen, despite their value being eaten away by high inflation.

The £20,000 annual ISA allowance has been frozen since 2017 and will remain so until after the next election. If it had risen in line with inflation, it would already be £22,235.

Other tax-free savings rates will be frozen in yet another blow to investors, who will also face lower fees and higher rates for both capital gains tax and dividend tax.

It comes despite mounting warnings that the scale of the tax grab threatens to plunge the UK into a deeper recession that could further damage public finances.

Economist Gerard Lyons, who advised both Boris Johnson and Liz Truss, warned yesterday that an “austerity package” of tax hikes and spending cuts “is not the policy mix the economy needs.”

Jeremy Hunt will today unveil plans to raise £54bn to balance the government's books

Jeremy Hunt will today unveil plans to raise £54bn to balance the government’s books

Rishi Sunak has said a firm package is needed to curb inflation

Rishi Sunak has said a firm package is needed to curb inflation

Rishi Sunak has said a firm package is needed to curb inflation

Mr. Lyons acknowledged that Miss Truss “exaggerated and scared the hell out of the markets” in September with her ill-fated mini-budget.

But, writing on the Conservative Home website, he stressed: ‘We should not throw the baby out with the bathwater and think that fiscal policy cannot be used at all to help stabilize an economy that is going into recession.

“The danger is that a short-lived recession will become a much deeper one, with lasting scars.”

Mr Lyons said the government risked becoming a slave to the Office for Budget Responsibility, whose economic outlook forecasts will determine the size of tomorrow’s budget package.

Economist Gerard Lyons (pictured) warned yesterday that an 'austerity package' of tax hikes and spending cuts 'is not the policy mix the economy needs'

Economist Gerard Lyons (pictured) warned yesterday that an 'austerity package' of tax hikes and spending cuts 'is not the policy mix the economy needs'

Economist Gerard Lyons (pictured) warned yesterday that an ‘austerity package’ of tax hikes and spending cuts ‘is not the policy mix the economy needs’

Sir Edward Leigh (pictured) urged the chancellor not to raise taxes to fund a 'greater and greater state'

Sir Edward Leigh (pictured) urged the chancellor not to raise taxes to fund a 'greater and greater state'

Sir Edward Leigh (pictured) urged the chancellor not to raise taxes to fund a ‘greater and greater state’

“We have now created a situation where the OBR effectively determines the direct course of fiscal policy. The danger is a procyclical policy,” he said.

“When the economic outlook is bad, the finances look bad, so spending cuts or tax increases follow – but those in turn make the economy and finances worse.”

Some Tory MPs also warned Mr Hunt to limit the tax raid. Sir Edward Leigh urged the chancellor not to raise taxes to fund a ‘greater and greater state’, adding: ‘Will he remember the good voters of Mid England, people who seldom if ever received benefits, who worked all their lives? live for their mortgage and for their pension pot and they fear that more and more of them will be dragged into higher tax rates?

“Their pension fund has been attacked so that the state can continue to grow and more and more can be spent on benefit recipients.”

Mr Hunt said people wanted the UK to be ‘a country that pays for itself, that doesn’t borrow at the expense of future generations and that can be trusted when it comes to sound money’.

Speaking at the G20 summit in Bali, Rishi Sunak said the hard package was needed to curb inflation. The Prime Minister acknowledged that the UK’s international reputation for financial prudence had taken “a bit of a dent” and said rising prices were “the biggest challenge we face”.

He added: “It’s important that we get to grips with that.”