London agencies:
Britain's Chancellor of the Exchequer Jeremy Hunt has said he will have to raise taxes in his budget plan this week in order to fix public finances and ease a possible prolonged recession, the Sunday Times newspaper reported.
Hunt is trying to restore Britain's credibility among investors in its first budget plan since Rishi Sunak replaced Liz Terrace as prime minister last month, with a pledge to undo its economic policy mistakes, led by a series of unfunded tax cuts.
Trace's "mini-budget" in September led to a bond market slump that raised borrowing costs and eventually forced her to resign.
"This is going to be a huge choice moment for the country and we are going to put people at the forefront of ideology," Hunt said in an interview with the Sunday Times.
In addition to making deeper spending cuts, Hunt and Sunak are trying to prepare the Conservative Party for tax increases that could reignite the tensions in the party that forced Truss to resign and allowed Sunak to become Britain's fourth Tory prime minister since 2016.
The newspaper said Hunt plans to plug a 55 billion pound ($65.1 billion) gap in the British budget by freezing limits and increases for income tax, public insurance, inheritance tax and pensions for another two years.
The newspaper stated that he also intends to halve the tax exemption for capital gains tax and reduce the payment limits for the additional rate of income tax from 150,000 pounds to 125,000 pounds annually.
"What I can promise people is that I'm going to be honest about the scale of the problem and be fair in the way I handle those issues, and yes, that means people with higher incomes will bear the brunt," Hunt said.
Thursday's budget plan will include forecasts similar to those of the Bank of England, which warned earlier this month that the country faces a long recession ahead.
"I think it's very likely ... the question is not really whether we're in a recession but what we can do to make it shorter and less profound," Hunt said in the interview.
He added that he would seek to work in cooperation with the Bank of England to control inflation and the global rise in interest rates, which increases pressures on the British economy.
"The first thing I can do is help the Bank of England bring down inflation," he said.
He added that he wanted to give confidence to companies and families to invest and spend.
"If I can give them confidence that we have a plan to tackle inflation and restore stability to the economy, that would be an achievement," he said.
The newspaper said Hunt is likely to commit just £20 billion to extending the cap on government energy bills for another six months after April, a third of his estimated cost of £60 billion in the first six months meaning bills are likely to rise.
The newspaper said Hunt is also considering a multibillion-pound support package to protect pensioners and those receiving unemployment benefits from rising electricity bills.
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