The government will need to raise taxes in the forthcoming Budget if it is to deliver manifesto spending pledges while meeting its own fiscal rules, according to pre-Budget analysis carried out by the Institute for Fiscal Studies (IFS).
The IFS says the government will have difficulty meeting its target of balancing the Budget over the next three-years even under current policy. Fulfilling commitments made to increase spending on the NHS, schools, defence and overseas aid would require an additional £3bn by 2023/24, if the chancellor is to avoid making cuts elsewhere.
With income tax, NICs and VAT ruled out of bounds for tax rises, the IFS believes a ‘desirable package of reforms to make the tax system both more equitable and more efficient’ could include abolishing entrepreneurs’ relief, increasing council tax for more expensive properties, and restricting pensions tax relief to the basic rate. The IFS also notes that continuing the freeze on fuel duty would cost £4bn a year by the end of this Parliament.
Paul Johnson, director at the IFS, commented: ‘Rishi Sunak’s first Budget could be the most important fiscal event in years. It will set the direction of policy for the next five years. If this new government is going to make radical change to taxes and spending this surely is the time to do it.’
‘Top of the list should be the abolition of the misleadingly named entrepreneurs’ relief. Other candidates include reforming council tax to increase charges on more valuable properties, and ending the ludicrously generous tax treatment of capital gains at death and of inherited pension pots’, Johnson added.
The government will need to raise taxes in the forthcoming Budget if it is to deliver manifesto spending pledges while meeting its own fiscal rules, according to pre-Budget analysis carried out by the Institute for Fiscal Studies (IFS).
The IFS says the government will have difficulty meeting its target of balancing the Budget over the next three-years even under current policy. Fulfilling commitments made to increase spending on the NHS, schools, defence and overseas aid would require an additional £3bn by 2023/24, if the chancellor is to avoid making cuts elsewhere.
With income tax, NICs and VAT ruled out of bounds for tax rises, the IFS believes a ‘desirable package of reforms to make the tax system both more equitable and more efficient’ could include abolishing entrepreneurs’ relief, increasing council tax for more expensive properties, and restricting pensions tax relief to the basic rate. The IFS also notes that continuing the freeze on fuel duty would cost £4bn a year by the end of this Parliament.
Paul Johnson, director at the IFS, commented: ‘Rishi Sunak’s first Budget could be the most important fiscal event in years. It will set the direction of policy for the next five years. If this new government is going to make radical change to taxes and spending this surely is the time to do it.’
‘Top of the list should be the abolition of the misleadingly named entrepreneurs’ relief. Other candidates include reforming council tax to increase charges on more valuable properties, and ending the ludicrously generous tax treatment of capital gains at death and of inherited pension pots’, Johnson added.
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