A confidential Treasury assessment of the coronavirus crisis estimates that it will cost the Exchequer almost £300 billion this year and could require measures including an increase in income tax, the end of the triple lock on state pension increases and a two-year public sector pay freeze.
The Telegraph can reveal that a Treasury document drawn up for Rishi Sunak, the Chancellor, sets out a proposed “policy package” of tax increases and spending reductions which may have to be announced within weeks in order to “enhance credibility and boost investor confidence” in the British economy.
The document, dated May 5 and marked “Official – market sensitive”, reveals that the “base case scenario” now forecasts that Britain will have a £337 billion budget deficit this year, compared to the forecast £55 billion in March’s Budget.
It says tax rises and spending cuts which would raise between £25 billion and £30 billion – equivalent to a 5p increase in the basic rate of income tax – would be needed to fund the increased debt, and presents Mr Sunak with a menu of proposed measures to make up the shortfall.
Read More: Treasury blueprint to raise taxes and freeze wages to pay for £300bn coronavirus bill