Is the UK going to see tax hikes in autumn? Economists say it’s likely
2025-06-16 05:51:42
Oxford Street on May 2, 2025, in London.
Mike Kemp In photos Gety pictures
When the UK advisor Rachel Reeves announced its government budget last fall, it unveiled 70 billion pounds (95 billion dollars) for public spending to be funded through the higher borrowing and 40 billion pounds in the tax increase, which often struck more British companies, or insisted that it was a one -time step, and it tells the legislators that “we do not return to more taxes on taxes In fact more. “
However, the times have changed, and while Reeves tries to balance and adhere to books, Reeves is not negotiable “Financial rules” – During follow -up Spending on public services boasts In the midst of the unconfirmed economic outlook – it may have no choice but to enact more popular taxes.
In the spring, the Treasury had about 9.9 billion pounds from the limited financial “head hall” to achieve its main financial goal of daily spending funded by tax receipts instead of borrowing.
However, economic and financial expectations have become more challenging, as interest payments for debt and tax receipts are weaker than expected with low economic growth expectations.
The Budget Responsibility Office (OBR) said In March It expects the United Kingdom to record 1 % growth in 2025 and 1.9 % in 2026. OBR is an independent economic and financial predictor in the United Kingdom that evaluates government budgets to see if it is likely to meet or miss its financial goals.
Economists say these recent growth expectations appear optimistic now, and if OBR declined its forecast for 2026, it will leave a large space – if you do not erase it completely – the financial government room.
This means that the government has three options: reduce spending, increase borrowing, or more taxes.
Economists Commitment to increase public services and the budgets of the main departments In reviewing spending on Wednesday, and adhering to its slogan, daily government spending will not be funded by borrowing.
Taxes “Ghannat” rises away
“We believe that the government” room “will evaporate completely and that tax increases appear to be increasingly inevitable later this year,” said James Smith, an economist on the market, in the comments via e -mail.
Expect that if OBR reviews its growth forecast for 2026 to 1.5 % for 2026, this would raise the half of the government’s financial introduction.
He added: “Our scenario analysis shows that it may face a shortage of 4 billion pounds simply as a result of economic opposite pioneers, and perhaps much more if OBR expectations are more fundamental. This is before you think about the wider tax and spending faced by the advisor.”
When Sky News asked whether she might have to raise taxes further this year, Reeves seemed hesitant to answer the question, saying, “She will not write budgets for the future.”
“I will not write another four years of budgets before we pass until the first year of this government,” she told the broadcaster.
These comments came after a rude awakening of the consultant a day after reviewing the spending – On Thursday, the first local GDP data suggested that the UK economy was 0.3 % in April on a monthly basisWith the output resulting from the commercial tariffs and the tax height that Reeves introduced last fall.
The UK Chancellor, Rachel Reeves 10, left Dowing Street before PMQS in the House of Commons in London, UK on June 11, 2025.
Anadolu Anadolu Gety pictures
Economic expectations nor public financial resources have not improved last year, according to Paul Johnson, director of the Institute of Financial Studies, but “the opposite”.
“Reeves will now get all its fingers and pass it all its fingers, in the hope that OBR will not reduce its expectations in the fall. With the status of spending plans and the” IronClad “financial rules that Whisker’s Gnat, any step in the wrong direction will definitely raise more tax on tax.”
He added in the post -spending review analysis, “No one should be in any doubt that the consultant has some difficult decisions incredibly to take actions and their balance.
Life will become more difficult for the Ministry of Treasury as it looks forward to maintaining this budget during the summer, as clouds are already formed on the country’s growth.
Where tax increases can occur
The government has already retracted some of the irresponsible cuts-such as canceling the winter fuel payments for retirees-and announced this week of significant reinforcements of public services and spending on departments, with health and defense obtaining a billion pounds batch.
With unlikely spending discounts and Reeves settings for not resorting to borrowing to finance daily spending, tax increases are their only real choice.
This would break the River pledge to avoid additional tax constipation, and will dismantle the Labor Party statement not to raise the income tax, national insurance contributions (social security) or to raise value -added tax, which is an added tax to most products and services.
Shadow Advisor Rachel Reeves, Sir Kerr Sir Star and Deputy Leader of Angela Rainer, will attend an event to launch pledges in the Labor Party elections at the scenes center on May 16, 2024 in Portfelite, UK.
Lyon Neil Getty Images News | Gety pictures
On Thursday, Mujtaba Al -Rahman, Managing Director of Europe at the Eurasia Group, indicated that those familiar with the Labor Party are now afraid of months of speculation about the place where tax increases can land.
“The easiest financial way is to violate the work pledges to work by not raising the income tax, national insurance for employees or Virginia, however [Prime Minister Keir] Al -Rahman said in the comments via e -mail that Starmer does not want to do this, for fear of a violent reaction to “broken promises.”
He said that Reeves is likely to scare many smaller heights-for example, extending the current freezing on income tax suits and thresholds for another two years until 2030.
Other options include restricting tax exemption on pensions for high owners, and a 3 billion pounds tax on the gambling and council tax, which is based on property values 1991.
Al -Rahman said: “As for Reeves, there will be no easy answers to the question of how to make their exaggerations add.”
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