Thu, 20th August Cardiff 15°
Nation.Cymru wordmark
Advertisement

News

Chancellor should raise taxes not cut spending to meet fiscal rules – think tank

By Mark Mansfield
Chancellor of the Exchequer Rachel Reeves. Photo Peter Byrne/PA Wire

The Chancellor should increase taxes instead of cutting welfare to balance the books when she delivers her spring statement at the end of the month, a leading think tank has said.

Rachel Reeves is set to update her fiscal plans on March 26 against the background of a faltering economy and drastically reduced headroom against the debt rules she set herself in October.

According to a report from the Resolution Foundation published on Monday, she will need to find around £4.4 billion to meet her target of ensuring day-to-day spending is paid for with tax rather than borrowing, thanks to a combination of weak growth and higher interest rates.

[mid-content-banner]

Raising taxes

Two options for achieving that aim are imposing deeper cuts on Government departments, or cutting disability and sickness benefits – something she is reported to be considering.

But the Resolution Foundation urged her to look at raising taxes instead, saying extending the freeze on personal tax thresholds for another two years would raise £8 billion.

The think tank added this would also avoid harming living standards in the short term, as thresholds are already frozen until 2028, and mean 80% of the extra revenue came from the richest half of households.

Conversely, the report said raising the threshold for qualifying for personal independence payment (PIP), the main disability benefit, would raise £5 billion but focus cuts on the poorest half of families.

James Smith, research director at the Resolution Foundation, said: “The Chancellor must act decisively to meet her fiscal rules. But with the jobs market in recession territory, lower income households shouldn’t bear the brunt of any consolidation.

“Crucially, she should avoid turning the spring statement into a ‘sticking plaster’ budget, with long-term thinking on welfare reform undermined by the quest for short-term savings that could cause real harm.

“And with Britain’s fiscal pressures more likely to intensify rather than fade away, continuing to rule out tax rises is going to make future budgets even more challenging to deliver.”

[lower-mid-content-banner]

Sticking plaster politics

During the election, Sir Keir Starmer spoke out against what he called “sticking plaster politics” that had seen government focus too much on short-term solutions to long-term problems.

But Labour also promised not to increase taxes on “working people”, specifically income tax, national insurance or VAT.

The Chancellor also chose to use her budget in October last year to confirm that the freeze on personal tax thresholds, introduced under the Conservatives in 2021, would end as schedule in 2028, saying extending it would “hurt working people”.

She added: “I am keeping every single promise on tax that I made in our manifesto.”

For the price of a cup of coffee a month you can help us create an independent, not-for-profit, national news service for the people of Wales, by the people of Wales.

Get more trusted Welsh news

Choose Nation.Cymru as a preferred source in Google News to see more of our journalism.

Choose Nation.Cymru as a preferred source in Google News

18 comments

Mab Meirion

A flock of Seagulls for a government... Stealing the chips off the casualty list of 15 years of bad government... Fat Shanks to Clark of Kent "there is a bit of marrow left in their bones see if you can get at it"...

Reply
Hogyn y Gogledd

I have two words to say to Reeves and to Starmer: TAX WEALTH!

Reply
Mark

...and watch the wealth evaporate. The wealthy are mobile people, and their wealth is even more mobile. Many of the super-rich have left the country over the last twelve months, and those that are left have moved most of their wealth beyond the chancellor's reach. If the government start talking about a wealth tax, that will only accelerate. "Tax the rich" is a great sound-bite, but it is not going to generate a meaningful amount of tax. Mind you, one of our Celtic neighbours, Manx, will benefit greatly.

Reply
Hogyn y Gogledd

Funny how so much wealth is hidden in UK and its off-sdhorwe tax havens by Russians, Saudis and the rest. I think one percent on over-ten-million would still be very attractive.

Reply
Mab Meirion

Mrs 'More Free Tickets' Bumble and Clark are just another 'Firm' following in the footsteps of Fat Shanks and not a government for the people... Just a new front for the old Robber Barons of England...

Reply
Frank

If we were all rich we could avoid paying tax.

Reply
hdavies15

You can say that again !

Reply
Frank

If were all rich we could avoid paying tax.

Reply
hdavies15

Oh, you did !

Reply
Bert

Start by abolishing the NI discount enjoyed by those earning over £50k.

Reply
Howie

A socialist think tank saying extend thresholds does not take into account the fiscal drag of more low income people being brought into the tax regime as well putting some into the 40% bracket that were never envisaged to be there, although inflation has eroded their income buying power. Just got my 7.85% risen council tax bill plus higher energy costs to contend with as well.

Reply
hdavies15

The fat cats will be well looked after. Rachel and the Labour crew are so fixated about protecting the ultra wealthy they can't even begin to concede that they are hitting the wrong segment of the tax-paying public. They need to plug loopholes, cut scope for scamming and rethink the taxation rates applying to higher earnings for starters. Then do some real research on how to address taxing of wealth as there may be lots of grey areas on valuations etc.

Reply
Y Cymro

Reform UK (cough) I mean , UK Labour, silly me, easy mistake to make, Chancellor of the Exchequer Rachel Reeves could tax the rich but she opts the hit the poor because it's easier to lean on ones at the bottom of the social ladder as the idle rich are transient and the those in poverty rooted. Populist Keir Starmer's Labour government has zero concern for those on benefits , especially ones on PIP, in which sadly the largest recipients are in Wales. As usual we are lumped in with England being around 3.6 million claimants combined. Labour has always weaponized Welsh poverty, as do Reform UK and Nigel Farage, by focusing on deprived areas of Wales like a drug dealer. Neocon Keir Starmer cares only about his public image. He wants to be "war leader" like his idol Margaret Thatcher was in the early 80s. He desperately wants to be adored by the Trumpian far-right by using the Ukraine / Russia war to cover over his shambolic period in office, where Labour has not reneged on numerous manifesto promises , but opted to continue with damaging Conservative policies and adopt Trumpian language and ideology. And I find the only promises Labour has ever kept is their Ironclad grip of Wales by denying us further devolution and maintaining the dated Barnet formular. So it's business as usual then for our continuity government. Let's screw the have-nots and maintain the Welsh Not

Reply
Mark

Raising taxes is not the answer. We are already paying the highest taxes in living memory, yet the NHS is a shambles, education is a joke, the military is a shadow of its former self, the police are only interested in violent crime and traffic offences. The problem is not a lack of cash, it is profligate waste across all layers of government, and in all public services. It is a mind-set problem where people spending other people's money don't give a damn how much they spend. This is true of government ministers (Cardiff & Westminster), waste at the institutional level in the public sector, and waste at the individual level in the public sector. This is not an easy problem to fix (culture-change never is), but taking more money off the public and giving it to the public sector is only going to result in more waste. Just look at the NHS - highest budget in history and highest headcount in history, yet the service delivered to the public is also the worst in history.

Reply
Hogyn y Gogledd

Our taxes are much lower than those in civilised countries like those in Scandinavia (plus Finland, of course). And the services we get in return are also much lower.

Reply
Mab Meirion

Cruelty refined, Sadism promoted and personal relationships exploited beyond linked in Wedded in...joined at the Altar...the new Aristocracy...

Reply
Charles Coombes

2% tax on the richest.

Reply

Leave a reply

Replying to Mab Meirion Cancel

A flock of Seagulls for a government... Stealing the chips off the casualty list of 15 years of bad government... Fat Shanks to Clark of Kent "there is a bit of marrow left in their bones see if you can get at it"...

Comments are reviewed before they appear.