On a day when two leading think tanks said high taxes had arrived for good and wages were set for the longest period of stagnation since the 19th century, Hunt insisted the £55bn budget squeeze was “fair”. But Tory MPs slammed the £25bn tax hikes on Thursday, which take Britain’s tax burden to 37.1 per cent of economic output, the highest since the second world war. David Jones, a former Welsh secretary, said the Tories’ prospects of winning the next election “will become more remote” if the tax hike plan remains in place. Citing traditional Tory arguments about the impact on incentives and the overall health of the economy, Richard Drax, MP for South Dorset, said the tax hike “risks stifling growth and productivity”. Jacob Rees-Mogg, a former business secretary, told Channel 4 that Hunt had taken the “easy option” of raising taxes. The rapid transition from the unfunded tax cuts of September’s “mini” Budget to the biggest fiscal consolidation since 2010 has unsettled MPs and party supporters, who have become uncertain about the economic model the party is now following. While Hunt insisted his package was “compassionate” because of measures to protect pensioners and people on benefits, many Tories fear it will leave voters on low and middle incomes exposed. As Tory-supporting papers rounded up the government, the Daily Mail’s front-page headline declared: “Tories soak campaigners”. But economists largely welcomed the government’s newfound fiscal prudence, showing how Rishi Sunak’s administration risks being pulled in different directions by political and fiscal demands. IMF Managing Director Kristalina Georgieva said Hunt had struck “the right balance between fiscal responsibility and protecting growth and vulnerable households”. The IMF’s praise of Hunt’s fiscal statement contrasted with the fund’s sharp public criticism of Kwasi Kwarteng’s mini-budget on 23 September. Other economists called for even bigger tax increases to avoid sudden interest rate hikes by the Bank of England as it tries to fight high inflation. Ben Nabarro, chief UK economist at Citi, said Hunt’s measures were “the bare minimum” needed to restore UK fiscal credibility and were not enough to prevent the BoE from raising rates further. He said the BoE could raise interest rates from the current 3 percent to 4.25 percent. Hunt insisted to Tory MPs that his autumn statement could help deliver a general election victory due in 2024 because it would restore faith in the party’s ability to run the economy. Recommended “A Tory election victory is underrated,” said a Hunt colleague. “If you saw the grim look on Labor’s faces during the autumn statement, you could see it wasn’t what they expected.” Sunak argues that the next election can be won, but only if Tory MPs show discipline and support the new economic strategy, according to his allies. The prospect of a recession, falling house prices, rising unemployment, high inflation and higher mortgage rates over the next 12 months will be a major test of the party’s nerves. “The truth is that we have become much poorer. . We’re in for a long, hard, unpleasant journey,” said Paul Johnson, director of the Institute for Fiscal Studies, who argued Friday that higher taxes are almost certainly “here to stay.” The Resolution Foundation, another think tank, added that British workers were “living through two decades of wage stagnation”, with average real wages not expected to recover to 2008 levels until 2027. Such prolonged stagnation in real wages has not been experienced in this country since the 1820s, according to figures calculated by the Financial Times. Labor accused the Conservatives of unfairly squeezing ordinary workers. Rachel Reeves, shadow chancellor, said their “pockets” had been seen.
