Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
Oxford Street on May 2, 2025, in London.
Mike Kemp | In pictures | Getty images
When the British Chancellor Rachel Reeves announced her government budget last fall, revealing an increase of 70 billion pounds sterling ($ 95 billion) to public spending to be funded by higher loans and 40 billion pounds sterling of tax increases, which mainly hit British companies, she insisted that Single decision, telling the legislators that “we do not come back with more taxes, or more employers.”
However, times have changed and, as Reeves tries to balance books and stick to his non -negotiable declared “Tax rules” – while continuing An expenditure of expenditure on public services In the midst of an uncertain economic perspective – it may have no choice but to implement more unpopular taxation.
In the spring, the Treasury had around 9.9 billion pounds sterling of limited budgetary “margin” to achieve its main budgetary objective of having daily expenses financed by tax receipts rather than by loan.
Economic and budgetary prospects have since become more difficult, however, with higher debt payments and lower than expected tax revenues converge with lower economic growth forecasts.
The Budget Responsibility Office (OBR) said in March that it expects the United Kingdom to record growth of 1% in 2025 and 1.9% in 2026. The OBR is the independent economic and budgetary forecast for the United Kingdom which assesses government budgets to see if they are likely to achieve or miss its tax objectives.
This last growth forecast seems now optimistic, say economists, and if the ObR revises its forecasts in 2026 lower, it would leave a big bump – if not entirely wiped out – the government’s budgetary room.
This means the government with three options: reducing spending, increasing loans or increasing taxes more.
Tax increases later this year are increasingly inevitable, according to economists, with Reeves already commit to stimulating public services and key ministerial budgets In his expenditure examination on Wednesday, and stick to his mantra that daily public spending will not be funded by the loan.
Tax rises a “Moucheron mustache”
“We believe that the government’s” head room “will evaporate fully and that the tax increases seem more and more inevitable later this year,” said James Smith, economist of developed markets, in the comments sent by e-mail.
ING provides that if the OBR revised its growth forecasts in 2026 to 1.5% for 2026, this would half the government’s budgetary room half.
“Our scenario analysis shows that it could face a deficit of 4 billion pounds sterling simply due to winds-opposite winds, and perhaps much more than that if the changes in the forecast of the OBR are more substantial. It is before considering the wider tax and the spending pressures with which the chancellor is confronted,” he added.
When asked by Sky News as to whether she had to further increase taxes this year, Reeves seemed reluctant to answer the question, saying that “she was not going to write budgets for the future”.
“I will not write four years of budgets yet before we even succeeded in the first year of this government,” she told the broadcaster, although she conceded that “the world is very uncertain for the moment”.
These comments came after a brutal awakening to the chancellor one day after his expenditure examination – Preliminary monthly data from gross domestic product on Thursday suggested that the British economy decreased by 0.3% in April on a monthly basisWith the production struck by commercial prices and tax increases introduced by Reeves last fall.
The British chancellor of the chessboard Rachel Reeves leaves 10 Downing Street in front of the PMQ in the House of Commons in London, in the United Kingdom, on June 11, 2025.
Anadolu | Anadolu | Getty images
Neither economic forecasts nor public finances have improved compared to last year, according to Paul Johnson, director of the Institute of Tax Studies, but “rather the opposite”.
“Reeves will now have all his fingers and all his crossbings, hoping that the OBR will not retrograde their forecasts in the fall. With fixed spending plans and” iron “budgetary rules will be respected by a moucher of a fly, he warned Thursday.
“No one should be in any doubt that the Chancellor has had incredibly difficult decisions to take and balance the acts to play,” he added in the review of the journal after spending, noting that “tax constraints are too real and we cannot have everything we might want”.
Life will only become more difficult for the treasure, because it seems to maintain this balance throughout the summer, clouds already forming during the growth of the country.
Where tax increases could occur
The government has already returned to certain unpopular spending reductions – such as the abolition of winter fuel payments from retirees – and this week has announced large increases in public services and ministerial expenses, health and defense obtained increases of billions of pounds.
With unlikely spending discounts and the Mantra of Reeves so as not to use borrowing to finance daily expenses, tax increases are his only real option.
This would break the commitment of Reeves to avoid a new tax take, and break a manifesto of the Labor party promises not to increase income tax, national insurance contributions (social security) or to increase VAT, a tax added to most products and services.
The Shadow Chancellor Rachel Reeves, the work manager Sir Keir Keir Starmer and the assistant leader, Angela Rayner, attend an event to launch the electoral promises of the Labor Party at the Backstage Center on May 16, 2024 in Purfleet, the United Kingdom.
Leon Neal | Getty Images News | Getty images
The initiates of the Labor Party are now fearing months of speculation as to the increase in tax increases could land, Mujtaba Rahman, director general of Europe of the Eurasia group, noted on Thursday.
“The simplest financial route would be to violate the promises of labor manifests so as not to increase income tax, national insurance for employees or the VA. [Prime Minister Keir] Starmer does not want to do this, fearing a reaction on “broken promises” “, said Rahman in comments sent by e-mail.
Reeves will probably delight several smaller increases-for example, extend the current frost on income allowances and tax thresholds for two years to 2030, he said.
Other options include the restriction of fiscal reductions on pensions for senior employees, a sample of 3 billion pounds sterling on the game industry and an upheaval of the council tax, which is based on the value of the properties of 1991.
“For Reeves, there will be no easy answers to the question of how to add your sums,” said Rahman.
