Treasury sources said the economy was facing a “once in a generation challenge” for which there were “no quick fixes”.
Rachel Reeves is poised to increase tax for the wealthy. (Image: Getty)
Rachel Reeves has indicated that the wealthier will be forced to “contribute more” in anticipation of her second Autumn Budget. Treasury insiders have stated that the Chancellor will not reduce spending or significantly ramp up borrowing. However, this leaves her with no choice but to raise taxes amidst warnings of a £30billion deficit in public finances.
Sources close Ms Reeves told The Telegraph: “She will be fair when asking those to contribute more to rebuild our public services.” A Treasury source added she was ready to make “tough decisions” as the “stability” of public finances is at risk, but assured there would be no “return to austerity”.
They highlighted that the economy was facing a “once in a generation challenge” for which there were “no quick fixes”.
The source added that the Chancellor was committed to “maintain a tight grip on public spending and wage a war on waste” to keep inflation and interest rates low.
They said: “Borrowing more would put our public finances in jeopardy, saddling future generations with more debt, while a return to austerity would condemn the country to decline.”
This comes after reports that Ms Reeves is also eyeing up a £7 billion tax raid on pensions to plug the Budget black hole.
Experts warned the Chancellor could push up taxes both on pension contributions paid by working people, and on withdrawals by retirees.
Economists at Oxford Economics said the Chancellor will be forced to find savings of up to £30billion, including £6billion caused by the Government’s u-turns over benefit and winter fuel allowance cuts.
Options include raising £3 billion by setting a uniform 30% rate for tax relief on pension contributions, which would mean the Treasury seizes more cash from higher-rate taxpayers saving for retirement.
Ms Reeves could also impose National Insurance for the first time on the £50billion contribution that employers make to staff pension schemes, raising £2 billion.
Another £2billion could come from cutting the lump sum that people can take tax-free from pension savings to £100,000, down from £268,275 today.
