Chancellor Rachel Reeves has indicated that decisions regarding tax increases may be necessary in the upcoming Budget, scheduled for November 26. Economists widely expect adjustments to tax policies as part of efforts to balance the national budget. Despite previously ruling out any increases to VAT, National Insurance, or income tax in their election manifesto, the pressure to generate revenue appears to be mounting.
Shadow Chancellor Sir Mel Stride expressed concerns that Reeves’ comments suggest impending tax hikes. He criticized her and suggested potential dismissal if she fails to uphold commitments made during the campaign. The Resolution Foundation, a think tank with ties to the Labour Party, has remarked that tax increases are now “inevitable” and warned that avoiding cuts in these areas could be detrimental.
The Foundation proposed that raising income tax could be an effective strategy for generating revenue but should be accompanied by a reduction in employee National Insurance. They estimate such measures could yield significant funds while minimizing the burden on most workers. Additionally, they suggest freezing personal tax thresholds for two more years, potentially raising further revenue.
Reeves is set to address the importance of equity and opportunity in her Budget speech, aiming to address critical issues such as NHS waiting times and the national debt. Her message is anticipated to parallel comments made by Prime Minister Sir Keir Starmer, emphasizing a commitment to making tough but fair policy decisions for long-term national renewal.
The Office for Budget Responsibility (OBR) is expected to revise its productivity forecasts, which could result in increased financial burdens for the Chancellor. Reeves faces two primary rules regarding government finances: not borrowing to fund everyday public expenditure and ensuring that government debt decreases as a proportion of national income by the end of the current parliamentary term. The Treasury has not commented on speculative expectations for the upcoming OBR forecast.
Source: https://www.bbc.com/news/articles/ce8g6kdgzelo?at_medium=RSS&at_campaign=rss