It comes as households face rising mortgage costs, record high energy bills and rising food prices.
Sir John Redwood, who headed Margaret Thatcher’s policy unit, criticized the government’s “wrong economy and even worse politics”. He said: “We are not trying to overtax people who are in charge but are not rich. It’s the wrong signal to send.
“The government needs to understand that people need 10% more this year to stay still because the price of everything has gone up.”
Mr Hunt is also understood to be planning to freeze inheritance benefits and the lifetime pension savings allowance to help plug a £50bn budget black hole. Overall, a deep freeze on the threshold and benefits would cost taxpayers a total of £27 billion and the average family almost £1,000 each over the next six years, CEBR estimated.
As chancellor, Mr Sunak imposed a tax cap freeze until 2026 when inflation was just 1% in March 2021. But now inflation is over 10% and the tax cap freeze will cost the Treasury a lot more money.
Workers will pay £11.58 billion in extra income tax as some of them are caught paying the higher and additional rates of 40% and 45% for the first time.
The freeze will also take £11.8bn in death duties from bereaved families whose relatives’ estates exceed the IHT limits.
Once considered a tax on the rich, IHT has become a cash machine for the Treasury as rising property prices push thousands more properties over the £325,000 nil threshold, meaning tax is paid at 40%.
In addition, the government is expected to keep the lifetime allowance frozen at £1.073m, costing savers £3.2bn over the next five years as they are hit with charges of up to 55% on pension funds that exceed the limit.
Economists and tax experts have criticized stealth taxes as misleading and potentially harmful to the economy.
CEBR’s Kay Neufeld said there was a risk the stealth move would undermine incentives to work – “especially for those currently earning near the bottom”.
Daniel Pryor, of the Adam Smith Institute think tank, said: “If the government wants to burden millions of Britons with higher taxes, it should deal with that up front and raise rates instead. With sensible, transparent policy-making , they should stop the habit.”
A Treasury spokesman said: “We do not comment on speculation around tax changes outside of fiscal events.”
