IFS warns Rachel Reeves against half-baked dash for revenue'

"In a chapter from a report due to be published later this month, the IFS said Reeves could raise tens of billions of pounds in extra revenue without breaking Labour's manifesto pledges, but cautioned that higher rates on longstanding, poorly designed taxes would have a detrimental effect on incentives to work, productivity and economic growth. A budget focused purely on the politics could prove considerably worse on the economics, the thinktank said."

"Reeves has ruled out increases in income tax, national insurance and VAT before the budget next month, which is being viewed as a make-or-break reset for the government after a torrid first 15 months in office. While there is potential to close the budget gap with spending cuts or higher borrowing, the chancellor has come under pressure to avoid using them to improve the UK's financial position."

"Meanwhile, the interest rate on government borrowing has remained high this year, deterring the chancellor from increasing debt levels. Treasury officials are understood to be considering several tax-raising options in an effort to close a spending gap of 20bn to 30bn. Adding to the need for higher tax receipts, Reeves is keen to double a near 10bn budget buffer to about 20bn to allow for greater flexibility when the public finances come under pressure."

Rachel Reeves faces a £20–30bn shortfall in next month’s budget and is considering revenue measures alongside spending adjustments and borrowing. A patchwork of unrelated tax rises risks harming work incentives, productivity and economic growth, especially if it relies on higher rates for longstanding, poorly designed taxes. Increases in income tax, national insurance and VAT have been ruled out ahead of the budget. Treasury officials are exploring tax-raising options while high government borrowing costs deter more debt. Rebel MPs have constrained spending cuts. Reeves seeks to increase a near-£10bn contingency buffer to about £20bn for greater fiscal flexibility.

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