The Chancellor of the Exchequer, Rachel Reeves, recently confirmed one of the worst kept secrets in politics: this year’s Autumn Budget will see further tax increases. Ms Reeves told October’s annual meeting of the International Monetary Fund (IMF) that she would be targeting those with the ‘broadest shoulders’ when she delivers her statement on 26 November. Here, we look at Ms Reeves comments and examine the expert predictions for the Autumn Budget.
Productivity forecasts
The Chancellor is widely expected to deliver a package of tax increases and spending cuts on 26 November. This will be necessary to stay within her own fiscal rules in the face of deteriorating forecasts from the independent Office for Budget Responsibility (OBR).
These are expected to leave the Chancellor with a shortfall of around £30 billion when compared to the Spring Statement.
Fair share of tax
Speaking at the IMF meeting in Washington DC, Ms Reeves said: ‘I want Britain to be a great place for talent, for entrepreneurs, for successful individuals to come and that requires getting the balance right.
‘But I do think those with the broadest shoulders should pay their fair share of tax and I think you can see that from my actions last year at the Budget.
‘I want the UK to remain an attractive place, but we’ve got to get the balance right and I do think that if Britain is your home, you should pay your taxes here.’
Wealth taxes
The Chancellor did rule out implementing a wealth tax in the UK, pointing out that tax increases in last year’s Budget, such as VAT on private school fees and higher taxes on private jets, largely applied to wealthier people.
The Chancellor also played down the likelihood of taxing banks more heavily.
Ms Reeves said: ‘We want to make sure that Britain is a great place to do business and to bring in business. Just in the last week or two, JP Morgan have made a £300 million investment in Bournemouth, for example.
‘Financial services is one of our big success stories in the UK and we want to make sure that we have a competitive environment. But also, we want to make sure that everyone pays their fair share of taxes. We’ve got to get the balance right there.’
Manifesto promises
A report from US investment bank Morgan Stanley suggests that the Chancellor could raise as much as £45 billion in taxes without breaking Labour’s manifesto promises.
The report acknowledged the difficult choices facing Ms Reeves as she plots a course between tax rises, spending cuts and limiting the political and economic fallout of her decisions.
In a table of possible tax hikes that it argued could raise between £25 billion and £45 billion, the investment bank said the biggest potential revenue-raising measure would be to extend the freeze on Income Tax thresholds by at least another year to generate up to £10 billion.
Other measures included taxes on gambling, the banking industry, changes to Council Tax and an overhaul of pension taxation.
Morgan Stanley said: ‘Overall, we believe the Budget is likely to be less bad than feared on the balance of one) tax increase impacts spread across sectors (and therefore generally moderate), while two) still being extensive enough to reduce the current level of market fiscal concerns (at least tactically).’
The Autumn Budget
The Chancellor will deliver the Autumn Budget to Parliament on 26 November.
Whatever changes are made, Mercia’s tax experts will be watching and will provide detailed analysis of the day’s announcements. Keep your clients up to date with our range of digital and printed products.