Rachel Reeves could be forced to raise billions of pounds in additional tax revenue if she wishes to avoid public service cuts, a leading think tank has warned.
The Institute for Fiscal Studies (IFS) has claimed £25 billion of tax increases would be needed to keep spending rising with national income.
Both Reeves and Keir Starmer have said their government would not see a return to austerity, but the IFS’ statement suggests such large tax increases could be needed to avoid this.
The think tank’s director Paul Johnson said: “It is easy to think that we face a short-term challenge somewhat artificially created by a particular set of arbitrary fiscal rules. That would be a mistake.
“Pressures on health and pension spending will continue to increase, and revenues from fuel and tobacco duties will fall. That will make remaining on course for current budget balance harder over the course of this parliament. If Ms Reeves does not grasp the nettle on 30 October, it could come back to sting her again before the next election.”
READ MORE: Labour’s first Budget 2024: What policies could Rachel Reeves announce?
Debates around the levels of taxation in Britain have long been fought in Labour circles, with many of the party’s activists and politicians arguing for higher taxes in order to fund public services.
But critics of this approach point to a record high tax burden faced by many working people in Britain today – and caution against deterring investment with too high taxes.
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