Reeves warned she will have to break manifesto commitment on tax to deal with economic black hole
Rachel Reeves given tax warning over manifesto pledge
- Rachel Reeves has been warned by leading economists that Labour's current strategy of introducing small new taxes, such as a mansion tax or gambling levy, will be insufficient to address a significant budget deficit.
- Economists, including Lord Jim O’Neill and the National Institute of Economic and Social Research (NIESR), estimate a £41.2 billion black hole in the autumn Budget, necessitating more substantial revenue generation.
- To meet spending plans and fiscal rules, Ms Reeves may be forced to break Labour’s manifesto pledge by increasing income tax, VAT, or employee national insurance.
- Proposed smaller taxes like a mansion tax, a landlord national insurance contribution, and a gambling tax are considered insufficient to fill the budget gap and face criticisms regarding their effectiveness and potential negative impacts.
- The UK's economic vulnerability, exacerbated by global conflicts, tariffs imposed by Donald Trump, and rising gilt market costs, contributes to the pressure on public finances.