Tax rises are now ‘pretty much inevitable’ after the Government’s recent policy reversals, according to a top economist.
Labour’s recent U-turns will push Rachel Reeves to hike taxes by £30bn, a top economist has warned. Experts worry tax rises are all but guaranteed after Labour pledged to scrap its winter fuel payment cuts and review the two-child benefit cap.
The moves heap pressure on the Chancellor, who is trying to plug a hole in the national finances. The policy reversals risk forcing the Government to break a manifesto pledge not to put up income tax, National Insurance and VAT. Stephen Millard, acting director of the National Institute of Economic and Social Research (NIESR), told The Telegraph: “It is pretty much inevitable now that she will have to raise one of those big taxes.”
Mel Stride accused of the Chancellor of being ‘out of her depth’ (Image: Getty)
The economist warned that the Chancellor may have to raise between £10bn and £30bn from taxpayers, in order to foot the bill of the policy U-turns. This comes after her eye-watering £40bn worth of tax rises last year.
Shadow Chancellor Mel Stride said Ms Reeves was “out of her depth” and added: “Rachel Reeves, our tin foil Chancellor, has folded at every turn – rewriting fiscal rules and then constantly teetering on the edge of breaking them, while at the same time fuelling speculation over welfare U-turns.”
A leaked memo last week saw Angela Rayner calling on Rachel Reeves to hike taxes (Image: Getty)
Last week’s decision by the PM to cave into backbenchers and scrap the cuts to Winter Fuel Payments, as well as public sector pay deals and the increase in funding to crack down on migration, all ramp up costs to the Treasury. Those decisions, added to the PM’s reported desire to abolish the two-child benefit cap, will be estimated to cost the Treasury £18bn.
A Treasury spokesman said: “The fiscal rules are non-negotiable. We put them in place to create stability and support investment and have seen what happens when fiscal rules are put to one side.
“We are delivering growth built on strong and secure foundations through our Plan for Change, and we’ve seen the fastest economic growth in the G7 in the opening quarter of the year. At the same time, we’re also protecting payslips for working people by keeping our promise to not raise the basic, higher or additional rates of Income Tax, employee National Insurance or VAT.”
