Downing Street refused to rule out breaking manifesto pledges to find the cash. But it indicated proposals for a public sector pay freeze will be rejected, insisting the government will not forget the sacrifices made by people working on the frontline. The Treasury analysis forecasts a £337bn budget deficit this year compared with the £55bn forecast in March’s budget.
The Treasury team hard at work (Image: FlickR•GETTY)
It suggests up to £30bn of tax hikes and spending cuts to help fund the increased debt, equivalent to a 5p increase in the basic rate of income tax.
“To fill a gap this size through tax revenue risers would be very challenging without breaking the tax lock,” it states.
In the worst-case scenario, the assessment warns that the deficit could increase to £516bn in the current financial year.
Asked whether the triple lock on pensions still stands, a No 10 source said: “It’s too early to speculate about any future decisions.
“We’re facing a time of unprecedented economic uncertainty and we remain committed to the agenda that was set out in the Budget.”
The document sets out a two-year public sector pay freeze as a possible option.
But the move would be politically incendiary after nurses, doctors and other public sector workers have put their lives at risk in the fight against coronavirus.
A Downing Street source said: “We acknowledge that those on the frontline are doing an incredible job at the moment and we are determined to support them.
“Public sector pay decisions are made through the usual annual process and recommendations from the review bodies will be considered before pay awards are announced this summer.
“I would also say that we obviously recognise the work of the frontline staff in the current crisis and we’re not going to forget that after we’re through this crisis.”
Police chiefs warned a pay freeze would be “a deep and damaging betrayal”.
John Apter, the chairman of the Police Federation of England and Wales, said: “To even consider freezing the pay of our essential public sector workers to help the financial recovery would be morally bankrupt and would be a deep and damaging betrayal.”
The Treasury document is one of many put together by different teams to discuss ideas about future policy.
A source said it “does not reflect Government policy”.
The Conservatives pledged in their manifesto at the general election last year that the party would not raise the rate of income tax, VAT or National Insurance, and would keep the pensions triple lock.