{"id":150928,"date":"2024-10-10T02:35:10","date_gmt":"2024-10-10T02:35:10","guid":{"rendered":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/10\/10\/chancellor-may-need-to-raise-taxes-by-25bn-ifs-warns\/"},"modified":"2024-10-10T02:35:10","modified_gmt":"2024-10-10T02:35:10","slug":"chancellor-may-need-to-raise-taxes-by-25bn-ifs-warns","status":"publish","type":"post","link":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/10\/10\/chancellor-may-need-to-raise-taxes-by-25bn-ifs-warns\/","title":{"rendered":"Chancellor may need to raise taxes by \u00a325bn, IFS warns"},"content":{"rendered":"
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The chancellor will need to raise taxes by \u00a325bn if she wants to keep spending rising with national income, according to the Institute for Fiscal Studies (IFS).<\/p>\n

In its annual ‘Green Budget’ analysis, the IFS warned that the government would have to dramatically increase the \u00a39bn of tax rises outlined in its manifesto to meet the pressures on public services.<\/p>\n

The chancellor is likely to stick to her fiscal rule, which requires day-to-day spending to be met by tax revenues. This means she cannot increase borrowing to fill the gap.<\/p>\n

Rachel Reeves<\/a><\/strong> will present her first budget<\/a><\/strong> in the Commons on 30 October. Paul Johnson, director of the IFS, said this budget could be “the most consequential since at least 2010”.<\/p>\n

The new Labour<\/a><\/strong> government has already pledged in its manifesto to increase government budgets by \u00a35bn and is spending \u00a39bn to settle public sector pay disputes.<\/p>\n

If Labour makes no further changes to the spending envelope, which was outlined by the previous government in 2021, it would register a surplus of \u00a317bn.<\/p>\n

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Please use Chrome browser for a more accessible video player<\/p>\n

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Will Rachel Reeves U-turn on her budget promise?<\/span>
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However, those spending plans are considered wildly unrealistic and would involve real term cuts to unprotected budgets.<\/p>\n

There is very little appetite for further cuts to public spending, so the chancellor could protect those budgets from inflation. That would leave her with a surplus of \u00a31bn.<\/p>\n

However, if she opted to protect spending as a share of national income – which better reflects population increase – she would record a deficit of \u00a316bn.<\/p>\n

That combined with the \u00a39bn of tax rises already promised would see taxes increase by \u00a325bn, further adding to a tax burden which is at a generational high.<\/p>\n

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Over-zealous borrowing plans could risk a UK buyer’s strike<\/h4>\n<\/p>\n

The UK risks a buyer’s strike in the bond markets if the chancellor is over-zealous with her borrowing plans.<\/p>\n

Rachel Reeves is expected to outline plans to increase borrowing for investment purposes in her Budget on 30 October.<\/p>\n

Although she has a debt rule that requires debt to be falling as a share of GDP in five years time, she could change her definition of debt to give herself extra headroom.<\/p>\n

In doing so, she could find up to \u00a350bn in additional headroom. However, the IFS warned the government against borrowing this much money. <\/p>\n

Economists said the chancellor should be slow and steady with any increases in borrowing, with full oversight of institutions such as the National Audit Office.<\/p>\n

They note that the UK has greater liquidity risk than its neighbours, including the EU so it was more exposed to changes in investor sentiment.<\/p>\n<\/p><\/div>\n<\/div>\n

It would be bigger than the net tax rises recorded in July 1997 and October 2010, which were both around \u00a313-\u00a314bn.<\/p>\n

The government has also penned itself in by promising not to raise income tax and corporation tax or to increase National Insurance or VAT.<\/p>\n

The IFS said that, even if Labour’s planned \u00a39bn tax rise is implemented, trying to balance the current budget while avoiding cuts to public service spending would put the budget “on a knife edge” and highly sensitive to OBR judgments.<\/p>\n

Read more from Sky News:
Final two confirmed in Tory leadership race<\/a><\/strong>
Home secretary enjoyed free tickets to Taylor Swift gig<\/strong><\/a>
PM refuses to rule out employer national insurance rises in budget<\/a><\/strong><\/p>\n

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It said the chancellor has inherited an “unenviable” public finance situation as taxes are already at a historic high and debt is rising, while public services such as prisons, police and local councils are under strain.<\/p>\n

Mr Johnson, said: “The first budget of this new administration could be the most consequential since at least 2010\u2026 Taxes are at an all-time high, and she is tightly constrained by her pledges not to raise the main rates of income tax or corporation tax, or to increase National Insurance or VAT at all.<\/p>\n

“The temptation then is to borrow more, perhaps changing the definition of debt targeted by the fiscal rules. But, given her pledge to balance the current budget, that would not free up additional resource for day-to-day spending.”<\/p>\n<\/p><\/div>\n


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The chancellor will need to raise taxes by \u00a325bn if she wants to keep spending rising with national income, according to the Institute for Fiscal Studies (IFS). In its annual ‘Green Budget’ analysis, the IFS warned that the government would have to dramatically increase the \u00a39bn of tax rises outlined in its manifesto to meet […]<\/p>\n","protected":false},"author":2,"featured_media":150929,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"tdm_status":"","tdm_grid_status":"","fifu_image_url":"https:\/\/e3.365dm.com\/24\/10\/768x432\/skynews-pjas-politics-at-jack-and-sams_6709400.png?20241007140310","fifu_image_alt":"","footnotes":""},"categories":[603],"tags":[69364,4949,51092,4605,1830,5219],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/150928"}],"collection":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/comments?post=150928"}],"version-history":[{"count":1,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/150928\/revisions"}],"predecessor-version":[{"id":150930,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/150928\/revisions\/150930"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/media\/150929"}],"wp:attachment":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/media?parent=150928"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/categories?post=150928"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/tags?post=150928"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}