Chancellor Rishi Sunak is preparing for his autumn spending review on October 27 when he reveal how the Government will balance the books after Covid.
Britain is braced for a double whammy of fresh austerity measures and tax hikes, with the Institute for Fiscal Studies predicting the Treasury will cut billions of pounds from the budgets from Whitehall department budgets.
But as Mr Sunak bids to take the UK economy out of deep freeze, his in-tray is bursting with urgent calls for new cash, from Boris Johnson’s numerous “levelling up” pledges to the UK’s transition to zero carbon by 2050.
Here are all the problems the Chancellor is being asked to fix.
The cost of living crisis
Calls are intensifying for the Chancellor to do more to support those on the lowest incomes as a perfect storm is brewing for poor households.
The global gas crisis is expected to see energy bills shoot up, with charity National Energy Action predicting 1.2 million to 1.5 million more people pushed into fuel poverty.
Add to those pressures the biggest tax burden since the war, a possible inflation shock pushing up food prices and the end of the £20 uplift in Universal Credit.
A Labour study of Office for National Statistics data found almost two million more people from working families were living in poverty – deemed to be below 60% of average household income after housing costs.
Mr Sunak will be under pressure to boost the minimum wage and to extend help for those at the sharp end.
Separately, Mr Sunak is expected to lift the public sector pay freeze in April, which has hit 2.6 million teachers, police and civil servants.
Recovering from Covid
The budget deficit high a peacetime high of 14% in the year to March and economists predict that a further six months’ funding furlough and other Covid restrictions mean an even heavier toll.
In the first year of the pandemic, April 2020 to 2021, the Government borrowed £299bn (the highest figure since records began in 1946).
While Mr Sunak is expected to say the Government will borrow less in the current year, April 2021 to 2022, the figure could still be more than £200bn and economists believe the deficit may have grown to 17% of GDP.
Julian Hamilton/Daily Mirror)
The Treasury has already frozen income tax thresholds and announced a manifesto-busting hike in National Insurance.
Corporation tax will also rise from 19% to 25% from April 2023, but Mr Sunak will be under pressure to do more to put the economy on a more sustainable footing.
The IFS believes the budgets for education, local government and justice could be facing £2bn cuts.
But with a backlog of 60,000 crown court trials, a crisis in town halls’ children’s services and a generation of young people hit by lost learning during the pandemic, the Chancellor will struggle to justify more austerity.
Or as the IFS put it: “These budgets were cut substantially in the 2010s, and a further round of cuts would be difficult to reconcile with the government’s stated objectives – particularly around ‘levelling up.”
Backbench fury over foreign aid cuts
Charities and MPs have already voiced anger that the Treasury has slashed overseas aid spending from 0.7% to 0.5% of national income.
Mr Sunak has been told he could further damage Britain’s international reputation after it emerged he plans to save cash by “recycling” aid money to help the world’s poorest.
This would mean the Government saves some of a £19bn windfall from the International Monetary Fund (IMF) – intended to help developing countries cope with the Covid pandemic – by counting the cash as aid.
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Most countries who get assets via the IMF’s special drawing rights (SDRs) use them on top of pledged extra cash pumped into their planned foreign aid budget.
But the Government has not denied reports the UK will reuse 75% of its allocation in order to save the Treasury up to £5bn in the coming years.
The move will leave backbenchers, including Conservatives, fuming.
Boris Johnson is expected to publish the Government’s flagship Levelling Up White Paper soon.
The drive is central to the Tories’ appeal to so-called Red Wall voters but its definition is vague, apparently covering everything from empowering local government to transport cash and boosting public services.
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Given the Northern Powerhouse Rail project, which would see new lines and upgrades connecting northern cities, would cost £30bn alone, Mr Sunak is under a lot of pressure to splash the cash.
The Chancellor was accused of a “stitch-up” over the £4.8bn Levelling Up Fund unveiled in March, which saw some deprived areas overlooked and cash overwhelmingly skewed toward Tory-held constituencies, so his spending review will be watched closely for signs of a similar “pork barrel politics” approach.
Research by the Local Data Company found that more than 8,700 chain stores closed on British high streets in the first six months of the year – an average of 50-a-day.
Tory backbenchers, the CBI and Labour have been calling on the Chancellor to reform business rates to offer retailers more support in the wake of the pandemic, but the Government is delaying a review of the levies.
Mr Sunak will be under pressure to do more.
At his speech at the Conservative Party conference in Manchester earlier this month, the Chancellor did not mention climate change once.
The UK will host the UN COP26 climate change summit in Glasgow later this month and the pressure is on the Government to show leadership.
The UK has targets to cut CO 2 emissions by 78% by 2035 and reach net zero by 2050, but reports suggest Mr Sunak is holding back.
Shadow Chancellor Rachel Reeves, meanwhile, has committed Labour to providing an extra £28 billion-a-year green investment.
The Heating and Boiler strategy is expected to be announced, which will be aimed at making electricity cheaper and gas more expensive over the course of the next 15 years.
Mr Johnson will ban the installation of new gas boilers after 2035, with Brits handed subsidies of between £4,000 and £7,000 for electric heat pumps, and surcharges will be put on to polluting gas rather than electricity, which will push up gas bills by £159.
How much help Mr Sunak will offer Brits saddled with the cost of retrofitting, which is as high as £12,000, will be key.
Despite tax hikes, the NHS remains under pressure and rising case numbers