Workers could face a £10bn stealth raid on income tax this month (Image: Getty)
Chancellor Rachel Reeves risks breaking the borrowing rules she set in her and will be faced with freezing taxes in a steath raid that could rake in an extra £10bn, the Institute for Fiscal Studies (IFS) has warned. By extending a Reeves would be taxing Britons more via “stealth”, IFS added.
Last autumn the Chancellor said she would only be borrowing to invest and not for government spending, a strategy the Telegraph reported as an attempt to .
But the British Chambers of Commerce (BCC) predicted the economy would grow by just under 1% in 2025 compared to its previous prediction of 1.3%.
Vicky Pryce, the chairman of the BCC Economic Advisory Council, said tax rises along with an increase in the minimum wage and concerns over a US trade war on China, the EU, Canada and Mexico had meant it had seen very little growth in the private sector.
She said: “There is a general malaise. People are being very careful both on the spending side, and on companies’ willingness to invest or grow. We are seeing demand slowing down.”
“We expect somehow or other [the Chancellor] will need to find some room for extra defence spending which will come at some stage, but she will have to find some cuts somewhere else.
“There is still a worry about whether eventually that may also mean higher taxes.”
Katy Eatenton, & Protection Specialist at Lifetime Wealth Management said: “The economy has been reeling since the tax increases announced in the Budget so any further taxation will be high risk at best, reckless at worst. Business confidence in countless sectors has been shattered and many firms have been battening down the hatches for several months now. Whatever the Chancellor does, you could argue that the damage has already been done.”
Don’t miss… [REPORT] [NEWS]
Matthew Oulton, of the IFS, added: “Rachel Reeves has engineered a trap for herself, albeit in difficult circumstances. Aiming to meet inflexible, pass-fail fiscal targets by the slimmest of margins was a risky strategy from the outset.
“It was always possible that economic conditions would deteriorate, put her on track to miss those rules, and push her into making tax and spending changes at what isn’t supposed to be a fiscal event later this month.”
The Resolution Foundation said freezing health-related benefits in cash terms could save £1bn per year, it said, while getting more people back into work would also help.”
Will the chancellor touch VAT or income tax or both?
There has been intense speculation Reeves will extend the freeze tax thresholds, but she may look beyond the status quo, some experts believe.
Jamie Elvin, Director at Strive Mortgages said: “Rachel Reeves faces a tough balancing act—plugging the UK’s fiscal black hole without spooking voters or businesses. Expect tax rises in disguise: stealth freezes, tightened loopholes, and higher levies on wealth and corporations. The big question—will she dare touch income tax or VAT? That’s the political gamble to watch.”
Justin Moy, managing director at EHF Mortgages said: “Reeves’ decisions made in the October Budget are now piling additional distress on many, with spending cuts on state services now eeded to fund her self-generated shortfall. Unfortunately, some additional tax income is inevitable, probably from small businesses, but a raid on personal assets could be an easy way to raise extra money, which will infuriate the nation yet again.”
A Government spokesman said: “The Government’s commitment to fiscal rules and sound public finances is non-negotiable.
“As previously announced, the OBR’s next forecast will be presented to Parliament on 26 March alongside a statement from the Chancellor. We do not comment on speculation around OBR forecasts.”