What are stealth taxes?

Chancellor Jeremy Hunt is set to deliver the Autumn Budget to lay out precisely how he plans to restore order to Britain’s public finances.Mr Hunt succeeded Kwasi Kwarteng on 14 October, becoming Britain’s fourth Tory Treasury boss since the beginning of July, in the wake of the debacle that was his predecessor’s ill-conceived ‘mini-Budget’ of 23 September.Mr Kwarteng’s radical but uncosted tax-slashing agenda, reliant on heavy government borrowing, promised to deliver ‘growth, growth, growth’ but instead spooked the international markets, tanked the pound, sparked chaos in the mortgage sector, prompted a dramatic intervention from the Bank of England to prop up pensions and brought a swift end to the premiership of Liz Truss, who has barely been seen in public since her humiliating exit from Downing Street.Brought in to steady the ship at No 11, Mr Hunt shrewdly postponed an announcement originally planned by Mr Kwarteng to take place at Halloween to buy himself more time and make the job of tabloid headline writers more difficult.He has since laid the groundwork for a fresh period of austerity, stressing the ‘difficult decisions’ placed upon him and the need to ‘face into the storm’ to ensure Britain’s long-term economic future is assured while remaining ‘compassionate’ to the many needs of the present.When he delivers his address to Parliament on Thursday, he is widely expected to unveil a package of tax rises worth £24bn and spending cuts of £30bn in order to plug a massive funding black hole in Treasury coffers and reassure the global financial markets that Britain remains a trusted trading partner.Among other things, his programme is being tipped in advance to include ‘stealth taxes’ to draw in additional revenue from income tax, national insurance, pensions savings, inheritance tax and VAT in the long to medium term.The chancellor could also hit businesses with similar measures – but what exactly is meant by a ‘stealth tax’?The phrase simply refers to any levy that is applied in such a way that it might not immediately be recognised as a tax hike but ultimately has the same impact. It originated among Conservatives in the late 1990s as an attack line used to criticise elements of Tony Blair and Gordon Brown’s New Labour fiscal agenda.For example, then-Tory shadow chancellor Francis Maude accused Mr Brown in October 1998 of imposing ‘stealth taxes… designed to conceal their effect’ rather than directly raising the basic or top rates of income tax, which New Labour had pledged not to do in its election-winning manifesto a year earlier.In Mr Hunt’s case, it is feared that the measures he will announce on Thursday could amount to stealth taxes in the sense that, rather than immediately and directly raising the income tax working people are expected to pay, he might prefer to freeze the rates at which they begin paying for longer (perhaps up until 2028).That could ultimately cause more middle-income families to be dragged into higher tax brackets by inflation and associated salary increases, meaning they will end up paying thousands more pounds in tax over the coming years.However, it should be stressed that it remains to be seen precisely what Mr Hunt will actually announce.The chancellor is scheduled to begin his address to the House of Commons at around 11.30am on Thursday morning before the Office for Budget Responsibility (OBR) delivers its own briefing on Britain’s economic and fiscal outlook at 2pm.With inflation at a 41-year-high of 11.1 per cent and the country already mired in a cost of living crisis, Paul Johnson, director of the Institute for Fiscal Studies, warned on BBC Radio 4’s Today programme on Thursday morning that deep gloom is likely to be the dominant mood of the day.’We saw the Bank of England provide some really very miserable forecasts for the future of the economy last week and there is no question whatever that the OBR will be following suit with some miserable forecasts which are much worse than what they were suggesting back in March,’ he warned.The Independent will be covering every moment of Mr Hunt’s speech as it happens on our liveblog and bring you breakout stories throughout the day.