Chancellor Jeremy Hunt is looking at tax rises and spending cuts totalling up to £60 billion as he aims to address the black hole in the public finances, it has been reported.
Treasury sources confirmed that up to £35 billion of the “fiscal tightening” could come in the form of reduction in spending, signalling a further squeeze on hard pressed services.
Ministers must present the key points of the plan to the Office for Budget Responsibility (OBR) so that it can prepare its economic forecast in time for the autumn statement on November 17.
Mr Hunt’s room for manoeuvre has become more constricted after the Bank of England warned last week that the country is facing the longest recession in more than a century.
Speaking on Sky News, the Cabinet Office Minister Oliver Dowden acknowledged that there would have to be “difficult decisions” on both tax and spending.
“We are going to have to face difficult decisions both on the tax side – we haven’t got to the end of the difficult decisions there – and difficult decisions on the spending side,” he said.
“Now, of course, in terms of the specific decisions that will be made, that conversation is ongoing between the Prime Minister and the Chancellor.
“We need to bear down on spending first and eliminate waste, excessive spending and only go to tax rises if it’s the last resort but given the difficult of the public finances, there is likely to be a mix of the two.”