Cliff Notes
- Leading economist Paul Johnson warns Rachel Reeves may need to raise taxes following disappointing economic indicators, contrary to her claims of a “fully funded” spending review.
- Reeves’ budget includes substantial allocations for NHS, housing, defence, and transport, but the IFS indicates further economic contractions may necessitate increased tax revenues.
- Despite pledging not to raise taxes on “working people,” Reeves did not entirely rule out tax hikes, citing economic uncertainties.
Rachel Reeves ‘a gnat’s whisker’ from having to raise taxes, says IFS
Rachel Reeves is a “gnat’s whisker” away from having to raise taxes in the autumn budget, a leading economist has warned – despite the Chancellor insisting her plans are “fully funded”.
Paul Johnson, director of the Institute for Fiscal Studies (IFS), said “any move in the wrong direction” for the Economy before the next fiscal event would “almost certainly spark more tax rises”.
Speaking the morning after she delivered her spending review, which sets government budgets until 2029, Ms Reeves told Wilfred Frost hiking taxes wasn’t inevitable.
“Everything I set out yesterday was fully costed and fully funded,” she told Sky News Breakfast.
Her plans – which include £29bn for day-to-day NHS spending, £39bn for affordable and social housing, and boosts for defence and transport – are based on what she set out in October’s budget.
That budget, her first as chancellor, included controversial tax hikes on employers and increased borrowing to help public services.