The UK chancellor laid the groundwork for tax hikes in a surprise pre-Budget speech this morning, and refused to rule out breaking Labour’s manifesto pledge on income tax, National Insurance and VAT rises.
Rachel Reeves said she will “make the choices necessary to deliver strong foundations for our economy” in the upcoming Autumn Budget, her second Budget as chancellor, as part of a gloomy speech about the state of the UK’s public finances.
“When I was appointed chancellor, people put their faith in me to take our country forward…not to always do what is popular, but to do what is right,” she said.
Rob Morgan, chief investment analyst at Charles Stanley, said the speech confirmed that major tax rises are likely, as well as other measures targeting wealthy clients.
“Today’s speech from Chancellor Rachel Reeves confirms what we previously suspected: that significant tax rises lie ahead in this year’s Budget and that areas previously ring-fenced by manifesto promises are no longer out of scope,” he said.
“Only the major taxes have the revenue-raising potential to fill a large portion of the hole in the government’s finances. With unwanted inflationary consequences of raising VAT and corporation tax a likely no-go area with many businesses already struggling, it leaves income tax and national insurance firmly in the cross hairs for a broad increase.
“In addition, we can expect a series of other measures targeting wealthier individuals. Yet the chancellor will need to be exceptionally careful any moves do not backfire once their impact on investment and growth are considered.”
