Rachel Reeves could raise more than £20 billion with a number of eye-watering taxes in next month’s Autumn Budget.
The Resolution Foundation, a centre-left think-tank with strong ties to the Labour Party, has urged the Chancellor to go after pensions and drivers to plug the £22bn financial blackhole. The think-tank’s new report sets out huge changes to capital gains tax, inheritance tax and national insurance as part of Labour’s first Budget.
The Resolution said that its proposals to the Chancellor meet a “triple tax test” which includes making the system more efficient, ensuring that taxes target those with the “broadest shoulders,” and not breaking 2024 manifesto pledges.
Among its recommendations, the Resolution Foundation has urged that the Chancellor hike up fuel duty and even charge drivers an extra 6p a mile to use their cars as part of a new road pricing scheme.
The temporary 5p cut in fuel duty costs the Treasury £2 billion a year. The think-tank says that annual increases in the motoring tax should be restarted for the first time in over a decade.
The recommendation to craft a comprehensive road pricing system will alarm motorists. The Resolution Foundation said the scheme would fill the losses from the switch to electric vehicles.
The report said that delaying these taxes on drivers “will likely only make the choice more painful, as the number of electric vehicle drivers grows daily – and it is easier to raise taxes for future drivers than current ones.”
The Resolution Foundation claims the Government could rake in £12bn a year if it reforms capital gains tax, which is levied on the sale of assets. The report adds that closing certain ‘loopholes’ in inheritance tax could raise a further £2 billion.
The report suggests that an extra £9 billion a year could be found if the Chancellor goes after pensions and levies National Insurance on employers’ contributions to staff pensions.
Adam Corlett, of the Resolution Foundation, said: “There is widespread speculation about what might be in the first Budget of the new Parliament, but overall tax rises are a dead cert and time-honoured tradition.
“The Labour manifesto included £10 billion of tax rises, but fresh ones will be needed in order for Rachel Reeves to sufficiently fund public services and investment while still hitting her fiscal rules.
“Long overdue reforms to Inheritance Tax, Capital Gains Tax and pension contribution reliefs would fit the bill and could raise over £20 billion if needed, while also making the tax system fairer and more consistent between different taxpayers.”
This comes as Ms Reeves and Prime Minister Sir Keir Starmer admitted the Government will have to make “difficult” decisions in the coming months.
This already includes a cut to winter fuel payments, which will leave more than nine million pensioners no longer eligible for up to £300 this winter
There are concerns dozens of Labour MPs could abstain in a vote in Parliament later.
Speaking to Labour MPs last night, Ms Reeves said the blame should fall on “reckless decisions” on public finances by the Conservatives. The Chancellor told them: “We stand, we lead and we govern together.”
During the election campaign, Labour ruled out increases in income tax, National Insurance and VAT.