The Institute for Fiscal Studies has published its yearly Green Budget, weeks ahead of Chancellor Rachel Reeves’s first fiscal event. It’s grim reading, for both the government and the public. For Labour to make good on its promise to avoid ‘austerity’, taxes are going to need to go up significantly: by £25 billion, the IFS reports, and that’s just to ‘keep spending rising with national income.’ That’s before the government tackles its pledges to invest. And that doesn’t rule out that ‘further tax rises or spending cuts could be required before the end of the parliament’.
Despite speculation that Reeves is changing the fiscal rules to enable her Treasury to borrow billions more, that will only release cash for capital investment. Her pledge to fund day-to-day spending through revenue remains the same – which will require Reeves either to scale back her spending plans or hike taxes to find the revenue. Having ruled out the former, the IFS reports that the UK is looking at a more transformative, even bigger tax-hiking Budget than Gordon Brown delivered in 1997 – which was to the tune of £14 billion – or George Osborne gave in 2010 – of £13 billion.
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