Labour lays the ground for September tax bombshell as Rachel Reeves looks to fill £50billion black hole in nation's finances
From September the Chancellor will be attempting to prepare the country for a difficult Budget that could be held in November, according to reports.
Rachel Reeves must find £50 billion in tax rises or spending cuts to balance the books, the National Institute of Economic and Social Research (NIESR) said this week.
However, she has vowed to stick to her pledge to not raise income tax, national insurance or VAT – and will also keep her fiscal rules preventing more borrowing.
The NIESR said higher-than-expected public sector borrowing and weaker economic growth had left the Chancellor with an 'impossible' choice.
The Bank of England also warned that it is likely to slow the pace of interest cuts as soaring food prices caused by Labour's tax increases threaten to drive inflation to 4 per cent this year.
Ms Reeves has already begun meetings with Sir Keir Starmer to draw up a plan for the Budget, according to The Guardian.
One tax that is almost certain to feature is a rise in gambling levies. The Chancellor said on Thursday: 'We've launched a review into gambling taxes. We'll set out our policies in our budget later this year.'
The Bank of England (pictured) also warned that it is likely to slow the pace of interest cuts as soaring food prices caused by Labour's tax increases threaten to drive inflation to 4 per cent this year
Taxes Reeves could hike to fill the black hole
Gambling taxes: A think-tank said it could raise £3.2billion.
Continue freeze on income tax thresholds: Thresholds normally rise in line with inflation but were frozen by the Tories until 2028. Extending this could potentially raise £8billion a year.
Hiking National Insurance: The Chancellor already broke her promise not to increase this measure at the last Budget.
Scrapping Lifetime Isa: The Treasury Committee is looking into whether Lifetime Isas – which provide a tax-free nest egg – are fit for purpose.
Pension tax relief: Ms Reeves once wrote applying a flat rate of pensions tax relief of 33 per cent – currently 20 per cent – would be 'a welcome boost for basic-rate taxpayers'.
Another option that could be under consideration is to target a subsidy paid to High Street banks that costs taxpayers £20billion.
Lenders currently receive interest payments of 4 per cent on reserves – which amount to almost £600billion – they have to hold risk-free at the Bank of England.
'The Treasury is on the hook to send the Bank of England over £20billion a year to cover its losses,' said Dominic Caddick of the New Economics Foundation.
Yesterday, Shadow Chancellor Mel Stride accused Ms Reeves of 'economic mismanagement'. He added: 'The Chancellor is planning yet more tax raids to plug the gaping black hole she has created – and it's hardworking savers and pensioners who'll pay the price.
'Rachel Reeves is taxing your future to fund her failure.'
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