What economic levers are left for Reeves to pull?
Summary
The National Institute of Economic and Social Research has issued a report forecasting a larger budget gap for the UK government than previously expected. The report suggests that tax increases may be necessary for the Chancellor, Rachel Reeves, to meet borrowing rules. Adjustments to VAT, pensions, and council tax are possible ideas to raise revenue.Key Facts
- The National Institute of Economic and Social Research (Niesr) issued a pessimistic economic forecast for the UK.
- The forecast suggests a budget gap of £40-50 billion, larger than previous estimates.
- The current buffer for borrowing rules is £10 billion, which Niesr describes as too small.
- The rules require that government day-to-day costs be paid from tax income, not borrowing.
- The report hints at tax rises to cover budget shortfalls, despite government promises not to change main tax rates.
- Potential areas for revenue increase include VAT, pensions allowances, council tax, and income tax thresholds.
- The International Monetary Fund suggests that budget adjustments should only occur once a year to avoid uncertainty.
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