The UK Labor government led by Finance Minister Rachel Reeves is considering a £20 billion tax rise to avoid cuts to public services. This measure is part of the next budget scheduled for 10/30/2023. The Resolution Foundation, a leading think tank, suggests that this tax increase is necessary to maintain service levels without actually reducing spending.
The Foundation recommended that the government adopt a new fiscal rule that values public debt differently, which could provide greater flexibility for long-term investment. James Smith, the foundation’s research director, stressed the importance of a new fiscal approach that would allow significant capital investment programs.
To balance public sector equity, the think tank recommends redefining the debt to include the value of a wider range of public assets than previous borrowings. This reset could make room for an additional £50 billion in investment funds.
The need for fiscal adjustment arose after official data indicated a modest economic growth of 0.2% in August after two months of stagnation. However, surveys have shown a decline in business and consumer confidence due to concerns about potential tax increases.
Earlier this week, the Institute for Fiscal Studies estimated a £25 billion tax increase would be needed to ease pressure on public services in the latest budget under the Conservative government of former Prime Minister Rishi Sunak.
Reeves acknowledged the £22 billion shortfall in public finances left by the Conservatives and indicated that some taxes would inevitably rise. The Resolution Foundation has outlined possible sources of revenue, including removing the inheritance tax exemption, increasing capital gains tax and imposing a social security levy on employers’ contributions to workers’ pensions.
The Labor Party has promised to protect “working people” from tax rises, rejecting increases in the main rates of income tax, value added tax, National Insurance and corporation tax, which together account for about three-quarters of current tax revenues. Let’s make.
Reuters contributed to this article.
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