Rishi Sunak insists painful tax rises are necessary because it's what the markets expect

Rishi Sunak has said he has to push ahead with painful tax rises and public spending cuts because that is what the markets expect him to do.

Speaking to reporters on his way to Indonesia for a meeting of the G20, the prime minister argued it was that expectation that had caused financial conditions to stabilise - and so he must deliver.

"Financial conditions in the UK have stabilised clearly, but they have stabilised because people expect the government to take the decisions that will put our public finances on a sustainable trajectory, and it's the government's job to deliver on that," he said on the plane headed to Bali.

"And that's what the chancellor will do."

Jeremy Hunt is expected to raise taxes for the majority of people by freezing thresholds for income tax, national insurance and a series of other taxes in Thursday's budget.

But the decision is likely to cause unease among some on the Tory backbenches. Simon Clarke - who was chief secretary to the Treasury and then levelling secretary - said he believed that a more pro-growth approach would involve focusing on spending cuts over tax rises.

He said: “One of the reasons that I supported Liz in the summer is that I believe very strongly that with the tax burden at a 70-year high we need to be extremely careful about further increasing the challenges facing businesses and households."

The former Tory leader Iain Duncan Smith has also warned higher taxes could make the expected recession worse.

Mr Sunak says he was acutely aware of how difficult things were right now given the slump in economic growth.

"But we're not alone in that," he said. "And the IMF has said that around a third of the global economy will be in recession either now or in the near future.

"So you would expect us to make sure that we are also cognisant of that supporting the most vulnerable."

He added: "The chancellor has said that we will do that crucially (while) delivering on the expectations of international markets, especially to make sure that our fiscal position is on a more sustainable trajectory. And that's what we will do."

Asked if we are in for years of pain, he added: "Now, the chancellor has also said that part of our job is not just to bring stability back to the system, which we will do, but it's also to lay the foundations for the economy to recover and grow."

He argued that ultimately that would allow the government to cut taxes and support public services. "And you'll hear that side of the equation from the chancellor as well.”

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