The Chancellor is facing a major budget challenge, Rachel Reeves must find billions in new revenue. A leading think tank has now issued a strong warning, the Institute for Fiscal Studies advises against quick tax fixes. It specifically urged her to avoid “half-baked” solutions. The government needs a plan for sustainable tax reform.
Furthermore, the Budget is expected next month, Reeves has strict, self-imposed rules for finances. She must balance day-to-day spending without new borrowing, she also must get national debt falling. These goals require difficult fiscal choices. Consequently, taxes are widely expected to increase.
However, the Labour manifesto promised no rises, it ruled out higher income tax, National Insurance, or VAT. This promise significantly limits the Chancellor’s options. Therefore, she must look elsewhere for new funds, and the IFS suggests several alternative revenue sources.
For instance, the government could double council tax, this would apply only to the most expensive properties. That move alone might raise four billion pounds. Alternatively, abolishing inheritance tax reliefs could yield six billion, extending the income tax threshold freeze is another possibility.
Nevertheless, the think tank cautions against many ideas, it strongly warns against implementing a wealth tax. Such a tax would face huge practical challenges, it might also penalize savings and encourage emigration. The IFS also dislikes changing pension tax relief. It calls that option unfair and economically distortionary.
Moreover, the IFS advocates for a broader systemic change, it believes the government should pursue sustainable tax reform. This means aligning tax rates across different income forms, the current system is not growth-friendly or fair. The think tank suggests starting with property taxes.
Additionally, the IFS director called the current council tax “ludicrously out of date”. She also labeled stamp duty an “absolutely awful tax”, she proposed a new, proportional property tax based on modern values. This kind of change represents true sustainable tax reform.
Ultimately, the Chancellor’s previous budget created “only losers”, a principled tax system overhaul could create some winners. The Treasury stated it will balance public service funding with growth. The nation now watches to see the Budget’s direction. The call for sustainable tax reform grows louder.
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