Chancellor Rachel Reeves is to face a stiff Budget in the UK on October 30 with a reportedly massive tax hike up her sleeve. Confronted by a £22 billion shortfall in public finances and her promise not to return to austerity, Ms Reeves may have to resort to tax increases of as much as £25 billion, the IFS points out. Still, Reeves has vowed to finance all of government’s operating budget from taxes and to use all of the borrowing for capital spending projects, which include infrastructure.
One key component of her policy might be to redefine measures of government debt. If she changes the way to exclude Bank of England’s losses or the accounting for public wealth, up to £16 billion can be freed for spending without breaching fiscal rules. Even so, much of that £25 billion of tax rises may still be needed to keep the books in balance.
This means, according to the IFS, that without public service cuts, Reeves will require additional taxes of some £16 billion over and above the £9 billion already planned. In a letter to The Sun, she expresses her reservations about reconciling fiscal rectitude with continued public service provision and avoidance of the dreaded quartet: income tax, National Insurance, VAT, and corporation tax.
This will be a balancing act such that her budget may end up being one of the most consequential since 2010.
