Fresh raid on pension pots, two more years of ‘stealth’ tax threshold freeze, or a wealth tax: IFS warns Brits face being battered by Reeves AGAIN in Autumn as her spending plans are unrealistic_Nhy
Brits could face being battered with tax hikes by Rachel Reeves again this Autumn because her plans are unrealistic, a respected think-tank warned today.
The IFS highlighted extending the freeze on tax thresholds by another two years as a potential ‘easy political win’ for the Chancellor, suggesting it could raise an extra £10billion.
Taxing lump sums taken out of pension pots might also look like a ‘juicy’ way of bringing in money, director Paul Johnson said.
A ‘wealth tax’ demanded by many left-wingers and capital gains reforms are options, but would probably not give the Treasury a big boost.
The grim picture emerged as the IFS held its traditional post-mortem on the day after the Spring Statement.
The economists pointed out that the plans are incredibly tight, warning it was a ‘coin toss’ whether Ms Reeves would be able to stick to them.
The dangers have been highlighted by Donald Trump announcing overnight that all US car imports will face a 25 per cent tariff from April 2.
Budgets might well have to be ‘topped up’ with taxes as it will be difficult to unpick departmental settlements after the Spending Review is finalised in June, according to the think-tank.
In a bruising verdict on the tricks Labour has used to prop up the finances, Mr Johnson said: ‘The OBR reckons that there is only a 54 per cent chance that, on current policy, we will actually get to current budget balance by 2029-30.
‘More remarkably, it puts the chances of meeting the second fiscal target, that debt (more precisely public sector net financial liabilities) should be falling in that year, even lower, at a mere 51 per cent – a coin toss.
‘That is despite a redefinition of debt which left much more space than the definition used until last year…
‘It is the combination of ‘iron-clad’ pass/fail numerical fiscal rules and next to no headroom against them that is causing so many problems, leaving fiscal policy completely exposed to economic developments outside the government’s control.
‘That is not conducive to a sensible policymaking process. This is not the OBR’s fault. It is the product of the Chancellor’s choices.’
The IFS said Ms Reeves has again pencilled in a rise in fuel duty in future years, even though that has not happened in reality.
Asked what the Chancellor might look at if she is forced to raise extra revenue, Mr Johnson said council tax reforms could get you ‘some more money’.
The IFS chief said extending the freeze on tax thresholds – in place since 2022 and due to end in 2028-29 – by another two years was the ‘easiest political win’.
That could draw in ‘something like £10billion at the end of the period, which is pretty helpful’, Mr Johnson said.
He said capital gains reforms could generate a ‘little bit of money’, but was more dismissive of the ill-formed idea of a ‘wealth tax’. ‘That’s certainly not going to get her a definite amount of money anytime soon,’ he said.
In a round of broadcast interviews this morning, Ms Reeves played down the prospect of more tax rises in the Autumn – but did not rule it out entirely.
Asked by Times Radio if it true she would have to do more cuts or tax rises in the Autumn, the Chancellor said: ‘No, it’s not.’
Pressed on whether she was ruling out measures, Ms Reeves replied: ‘What I’m saying is that there are loads of things that this Government are doing that are contributing to growth.’
She said: ‘That shows if we go further and faster on delivering economic growth with our planning reforms, with our pensions reforms, with our regulatory reforms, we can both grow the economy and have more money for our public services. And that is what I’m focused on.’
Asked if she would resign in the event she broke her own fiscal rules in order to avoid tax rises or further cuts, Ms Reeves told the broadcaster: ‘I’m not going to break my fiscal rules. I’ve said they are non-negotiable and we will continue to meet them.’
