The Chancellor Rachel Reeves has been told to raise taxes, and she must act decisively to “meet her fiscal rules,” by the Resolution Foundation.
The foundation has warned that since the Autumn Budget the economic outlook for the UK “has declined markedly.”
Higher interest rated, lower tax revenues along with weaker growth means there will have to be fiscal tightening in the Chancellor’s Spring Statement on 26 March.
The foundation warned Reeves must not hit the living standards of those who are on lower incomes.
The Resolution Foundation said, “Extending the freeze in personal tax thresholds by a further two years to 2029-30 would raise around £8bn.
“Crucially, this would not affect living standards in the short term as the policy wouldn’t take effect until April 2028, while 80% of extra revenue would come from families in the richest half of the income distribution.”
James Smith, research director at the Resolution Foundation, said, “The UK’s economic outlook has declined markedly since the Budget last Autumn. Weaker growth and higher interest rate expectations look set to turn the UK’s projected current surplus of £10bninto a deficit of around £5bn.
“The chancellor must act decisively to meet her fiscal rules. But with the jobs market in recession territory, lower income households shouldn’t bear the brunt of any consolidation.
“Crucially, she should avoid turning the spring statement into a ‘sticking plaster’ Budget, with long-term thinking on welfare reform undermined by the quest for short-term savings that could cause real harm.
“And with Britain’s fiscal pressures more likely to intensify rather than fade away, continuing to rule out tax rises is going to make future Budgets even more challenging to deliver.”
