RACHEL Reeves must find £50billion in her autumn Budget to keep the country’s finances in check, experts warn.
The shortfall is the equivalent of raising income tax by 5p for both basic and higher-rate earners, they say.
AlamyRachel Reeves must find £50billion in her autumn Budget to keep the country’s finances in check, experts warn[/caption]
The Chancellor has to raise taxes or cut spending to maintain her stated financial cushion of £9.9billion by the end of the decade, according to the National Institute of Economic and Social Research.
The think tank warned Ms Reeves faced an “impossible trilemma” of meeting her own fiscal rules while hitting spending commitments and upholding a manifesto pledge to not raise taxes.
Poor growth, eye-watering debt levels and welfare cut U-turns have led to a worsening outlook with £51.7billion extra costs, its analysis shows.
Prof Stephen Millard, from the institute, said: “We would advocate building a bigger buffer. To do that requires moderate but sustained increases in taxes.”
The think tank has upped its growth forecast for this year to 1.3 per cent but 2026 is down from 1.5 per cent to 1.2 per cent.
It said the UK could see inflation at a higher-than-expected 3.5 per cent owing to bigger wages and the national insurance rises.
Meanwhile, research shows the living standards of the poorest ten per cent of households fell by 1.3 per cent in 2023-24.
They are ten per cent lower than pre-Covid levels.
Shadow Chancellor Mel Stride said: “Labour will always reach for the tax rise lever because they don’t understand the economy.
“Businesses are closing, unemployment is up, inflation has doubled and the economy is shrinking. And Labour are refusing to rule out more damaging tax rises on investment.”
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