Latest news with #StephenMillard
BreakingNews.ie
7 days ago
- Business
- BreakingNews.ie
UK chancellor warned ‘tax rises needed to fill £51bn black hole in public finances'
UK chancellor Rachel Reeves will likely have to raise taxes as part of 'substantial' action needed at the autumn budget to plug a £51 billion (€58 billion) black hole in British public finances, a major economic think tank has warned. The National Institute of Economic and Social Research (Niesr) said weaker-than-expected recent economic activity, U-turns on welfare cuts and forecast-beating borrowing mean Ms Reeves is on track to miss one of her fiscal rules by £41.2 billion in 2029-30. Advertisement It cautioned she faces an 'impossible trilemma' of trying to meet her fiscal rules while fulfilling spending commitments and upholding a manifesto pledge not to raise taxes. Including the need to rebuild the fiscal buffer of just under £10 billion that has been wiped out, she will have to find over £51 billion, according to the group. In its latest economic outlook, Niesr said she will likely need to break her pledge not to raise taxes for working people and resort to 'moderate but sustained' hikes, or cut spending, to address the shortfall. 'Substantial adjustments in the autumn budget will be needed if the Chancellor is to remain compliant with her fiscal rules,' said Niesr. Advertisement The report has fuelled speculation over how the UK government may look to boost tax revenues in the autumn, including mounting rumours of a possible wealth tax. Professor Stephen Millard, Niesr's deputy director for macroeconomics, said: 'Things are not looking good for the Chancellor, who will need to either raise taxes or reduce spending or both in the October budget if she is to meet her fiscal rules.' Niesr said if the UK government moved to extend the income tax threshold beyond 2028, it would bring in around £8.2 billion – far short of what is needed. To fill the £51 billion black hole would require a rise in the basic and higher rates of income tax by five percentage points, according to the group. Advertisement It is recommending 'gradual' tax rises and for the chancellor to look at reforms, such as overhauling the council tax bands and possibly replacing it with a land value tax. UK culture secretary Lisa Nandy again ruled out introducing a wealth tax in response to warnings the chancellor could miss her fiscal targets by £40 billion. She told Sky News: 'The Chancellor has very much poured cold water on that idea, partly because many countries have tried this sort of approach, but mostly because we were elected as a government in a time when taxes on working people were at their highest rate for generations. 'We want to bring taxes down for people, we want to help support them, put money back into people's pockets, and all the things that we've been doing as a government in the last 12 months have been aimed at that.' Advertisement Niesr has urged the UK government to look at addressing the public finance woes by building a 'large fiscal buffer via a moderate but sustained increase in taxes'. It said: 'This will help allay bond market fears about fiscal sustainability, which may in turn reduce borrowing costs. (PA Graphics) 'It will also help to reduce policy uncertainty, which can hit both business and consumer confidence.' The UK chancellor has set herself two fiscal rules – the 'stability rule', which ensures that day-to-day spending is matched by tax revenues so the government only borrows to invest, and the 'investment rule', which requires the government to reduce net financial debt as a share of the economy. Advertisement Shadow chancellor Sir Mel Stride said: 'Experts are warning Labour's economic mismanagement has blown a black hole in the nation's finances which will have to be filled with more tax rises – despite Rachel Reeves saying she wouldn't be back for more taxes. 'Labour will always reach for the tax rise lever because they don't understand the economy.' Elsewhere in the report, Niesr nudged up its economic outlook for the UK, with growth of 1.3 per cent pencilled in for 2025, up from 1.2 per cent forecast in May. But the group cut its prediction for next year to 1.2 per cent, down from 1.5 per cent previously expected. Niesr also said the UK was in store for higher-than-forecast inflation, averaging around 3.5 per cent this year and edging back only slightly to 3 per cent in the second quarter of 2026. Despite the inflation pressures, Niesr expects the Bank of England to cut interest rates from 4.25 per cent currently to 3.5 per cent at the beginning of 2026.
Yahoo
7 days ago
- Business
- Yahoo
Chancellor warned ‘tax rises needed to fill £51bn black hole in public finances'
Chancellor Rachel Reeves will likely have to raise taxes as part of 'substantial' action needed at the autumn budget to plug a £51 billion black hole in the public finances, a major economic think tank has warned. The National Institute of Economic and Social Research (Niesr) said weaker-than-expected recent economic activity, U-turns on welfare cuts and forecast-beating borrowing mean Ms Reeves is on track to miss one of her fiscal rules by £41.2 billion in 2029-30. It cautioned she faces an 'impossible trilemma' of trying to meet her fiscal rules while fulfilling spending commitments and upholding a manifesto pledge not to raise taxes. Including the need to rebuild the fiscal buffer of just under £10 billion that has been wiped out, she will have to find over £51 billion, according to the group. In its latest economic outlook, Niesr said she will likely need to break her pledge not to raise taxes for working people and resort to 'moderate but sustained' hikes, or cut spending, to address the shortfall. 'Substantial adjustments in the autumn budget will be needed if the Chancellor is to remain compliant with her fiscal rules,' said Niesr. The report has fuelled speculation over how the Government may look to boost tax revenues in the autumn, including mounting rumours of a possible wealth tax. Professor Stephen Millard, Niesr's deputy director for macroeconomics, said: 'Things are not looking good for the Chancellor, who will need to either raise taxes or reduce spending or both in the October budget if she is to meet her fiscal rules.' Niesr said if the Government moved to extend the income tax threshold beyond 2028, it would bring in around £8.2 billion – far short of what is needed. To fill the £51 billion black hole would require a rise in the basic and higher rates of income tax by five percentage points, according to the group. It is recommending 'gradual' tax rises and for the Chancellor to look at reforms, such as overhauling the council tax bands and possibly replacing it with a land value tax. Culture Secretary Lisa Nandy again ruled out introducing a wealth tax in response to warnings the Chancellor could miss her fiscal targets by £40 billion. She told Sky News: 'The Chancellor has very much poured cold water on that idea, partly because many countries have tried this sort of approach, but mostly because we were elected as a government in a time when taxes on working people were at their highest rate for generations. 'We want to bring taxes down for people, we want to help support them, put money back into people's pockets, and all the things that we've been doing as a government in the last 12 months have been aimed at that.' Niesr has urged the Government to look at addressing the public finance woes by building a 'large fiscal buffer via a moderate but sustained increase in taxes'. It said: 'This will help allay bond market fears about fiscal sustainability, which may in turn reduce borrowing costs. 'It will also help to reduce policy uncertainty, which can hit both business and consumer confidence.' The Chancellor has set herself two fiscal rules – the 'stability rule', which ensures that day-to-day spending is matched by tax revenues so the Government only borrows to invest, and the 'investment rule', which requires the Government to reduce net financial debt as a share of the economy. Shadow chancellor Sir Mel Stride said: 'Experts are warning Labour's economic mismanagement has blown a black hole in the nation's finances which will have to be filled with more tax rises – despite Rachel Reeves saying she wouldn't be back for more taxes. 'Labour will always reach for the tax rise lever because they don't understand the economy.' Elsewhere in the report, Niesr nudged up its economic outlook for the UK, with growth of 1.3% pencilled in for 2025, up from 1.2% forecast in May. But the group cut its prediction for next year to 1.2%, down from 1.5% previously expected. Niesr also said the UK was in store for higher-than-forecast inflation, averaging around 3.5% this year and edging back only slightly to 3% in the second quarter of 2026. Despite the inflation pressures, Niesr expects the Bank of England to cut interest rates from 4.25% currently to 3.5% at the beginning of 2026.
The Independent
7 days ago
- Business
- The Independent
Chancellor warned ‘tax rises needed to fill £51bn black hole in public finances'
Chancellor Rachel Reeves will likely have to raise taxes as part of 'substantial' action needed at the autumn budget to plug a £51 billion black hole in the public finances, a major economic think tank has warned. The National Institute of Economic and Social Research (Niesr) said weaker-than-expected recent economic activity, U-turns on welfare cuts and forecast-beating borrowing mean Ms Reeves is on track to miss one of her fiscal rules by £41.2 billion in 2029-30. It cautioned she faces an 'impossible trilemma' of trying to meet her fiscal rules while fulfilling spending commitments and upholding a manifesto pledge not to raise taxes. Including the need to rebuild the fiscal buffer of just under £10 billion that has been wiped out, she will have to find over £51 billion, according to the group. In its latest economic outlook, Niesr said she will likely need to break her pledge not to raise taxes for working people and resort to 'moderate but sustained' hikes, or cut spending, to address the shortfall. 'Substantial adjustments in the autumn budget will be needed if the Chancellor is to remain compliant with her fiscal rules,' said Niesr. The report has fuelled speculation over how the Government may look to boost tax revenues in the autumn, including mounting rumours of a possible wealth tax. Professor Stephen Millard, Niesr's deputy director for macroeconomics, said: 'Things are not looking good for the Chancellor, who will need to either raise taxes or reduce spending or both in the October budget if she is to meet her fiscal rules.' Niesr said if the Government moved to extend the income tax threshold beyond 2028, it would bring in around £8.2 billion – far short of what is needed. To fill the £51 billion black hole would require a rise in the basic and higher rates of income tax by five percentage points, according to the group. It is recommending 'gradual' tax rises and for the Chancellor to look at reforms, such as overhauling the council tax bands and possibly replacing it with a land value tax. Culture Secretary Lisa Nandy again ruled out introducing a wealth tax in response to warnings the Chancellor could miss her fiscal targets by £40 billion. She told Sky News: 'The Chancellor has very much poured cold water on that idea, partly because many countries have tried this sort of approach, but mostly because we were elected as a government in a time when taxes on working people were at their highest rate for generations. 'We want to bring taxes down for people, we want to help support them, put money back into people's pockets, and all the things that we've been doing as a government in the last 12 months have been aimed at that.' Niesr has urged the Government to look at addressing the public finance woes by building a 'large fiscal buffer via a moderate but sustained increase in taxes'. It said: 'This will help allay bond market fears about fiscal sustainability, which may in turn reduce borrowing costs. 'It will also help to reduce policy uncertainty, which can hit both business and consumer confidence.' The Chancellor has set herself two fiscal rules – the 'stability rule', which ensures that day-to-day spending is matched by tax revenues so the Government only borrows to invest, and the 'investment rule', which requires the Government to reduce net financial debt as a share of the economy. Shadow chancellor Sir Mel Stride said: 'Experts are warning Labour's economic mismanagement has blown a black hole in the nation's finances which will have to be filled with more tax rises – despite Rachel Reeves saying she wouldn't be back for more taxes. ' Labour will always reach for the tax rise lever because they don't understand the economy.' Elsewhere in the report, Niesr nudged up its economic outlook for the UK, with growth of 1.3% pencilled in for 2025, up from 1.2% forecast in May. But the group cut its prediction for next year to 1.2%, down from 1.5% previously expected. Niesr also said the UK was in store for higher-than-forecast inflation, averaging around 3.5% this year and edging back only slightly to 3% in the second quarter of 2026. Despite the inflation pressures, Niesr expects the Bank of England to cut interest rates from 4.25% currently to 3.5% at the beginning of 2026.
The Independent
05-08-2025
- Business
- The Independent
Reeves warned she must raise taxes or cut spending to plug £41bn black hole
Rachel Reeves must raise taxes or tear up her flagship borrowing rules to fill a £41bn black hole left by Labour U-turns, higher borrowing and sluggish economic growth, top economists have warned. The National Institute of Economic and Social Research (NIESR) – a leading economic think tank – said the chancellor could also look at spending cuts in the autumn Budget as a way to raise the money needed by 2029-30 to remedy a £41.2bn shortfall on her 'stability rule'. Its report said the chancellor has been left with an 'impossible trilemma' of trying to meet her fiscal rules while fulfilling spending commitments and upholding a manifesto pledge not to raise taxes on working people. But after a swathe of spending cuts squeezing departmental budgets at the last spending review, tax rises are the more likely option. The chancellor is under increasing pressure to raise income tax or consider a wealth tax on the rich. The think tank's forecast warned that the poorest 10 per cent of people – amounting to 2.8 million households – have seen their living standards fall 1.3 per cent under Labour, some 10 per cent lower than pre-Covid levels. Professor Stephen Millard, NIESR's deputy director for macroeconomics, said a 'credible, sustained increase in taxes' would be required due to the 'worsening fiscal outlook', not helped by Labour's U-turns on welfare cuts. He warned that a large part of this would need to happen in the first year to signal to the markets that the Treasury is committed to further increases down the line. Speaking at a press conference on Tuesday, Prof Millard warned that the £9.9bn buffer the chancellor has set out for herself is 'really way too thin', and a 'slight change in fiscal circumstances' would wipe it out entirely. 'With growth at only 1.3 per cent and inflation above target, things are not looking good for the chancellor who will need to either raise taxes or reduce spending or both in the October Budget if she is to meet her fiscal rules,' he added. It comes despite the think tank nudging up its economic outlook for the UK, with growth of 1.3 per cent expected for 2025, up from 1.2 per cent forecast in May. But it cut its prediction for next year – to 1.2 per cent, down from 1.5 per cent. Prof Millard also suggested the chancellor could rewrite her fiscal rules with a new framework that looks at the long-term direction of travel of debt, rather than judging debt based on a point five years in the future, as the current rules dictate. He told The Independent the government should base its financial projections on current levels of taxation and spending, rather than planned increases or decreases. The latest warnings come despite the chancellor's promise not to come back for more major tax rises after she unveiled a £40bn package of increases in her first budget last year. NIESR's findings will pile pressure on her to come up with innovative solutions ahead of her budget in the autumn. In July, Ms Reeves is said to have told the Cabinet that plugging gaps would be a 'big challenge' as there is no longer any 'low-hanging fruit'. Last month, the government's embarrassing climbdown on planned welfare cuts saw Labour's benefits reforms gutted almost entirely, with savings from the bill slashed from £5bn to nothing. Meanwhile, fresh figures from the Office for National Statistics published in July showed that borrowing – the difference between public spending and income from taxes – rose to a higher-than-expected £20.7bn as debt interest payments soared. Responding to the NIESR report, shadow chancellor Mel Stride said: 'Experts are warning Labour's economic mismanagement has blown a black hole in the nation's finances which will have to be filled with more tax rises, despite Rachel Reeves saying she wouldn't be back for more taxes. 'Labour will always reach for the tax rise lever because they don't understand the economy. Businesses are closing, unemployment is up, inflation has doubled and the economy is shrinking. And Labour are refusing to rule out more damaging tax rises on investment. 'Only the Conservatives, under new leadership, believe in sound money and low tax.' The chancellor has set herself two fiscal rules – the 'stability rule', which ensures that day-to-day spending is matched by tax revenues so the government only borrows to invest, and the 'investment rule', which requires the government to reduce net financial debt as a share of the economy.
ITV News
07-05-2025
- Business
- ITV News
Chancellor on track to miss fiscal rules, says economic forecaster
The Government is on track to miss its key fiscal rules, increasing the likelihood of tax hikes later this year, an economic think tank has warned. Economic growth is also on track to be weaker than previously expected this year, according to the National Institute of Economic and Social Research (Niesr). Fresh forecasts from the organisation indicated that a slowdown in domestic demand and global economic uncertainty will impact potential growth throughout the year. It predicted that the UK economy will grow by 1.2% in 2025 'amid low business confidence, high uncertainty and rising cost pressures'. In its previous forecasts in February, Niesr had pointed to 1.5% growth for the year. The think tank indicated that the reduced level of growth will result in lower than previously predicted tax receipts. As a result, it said the Government is now expected to miss its fiscal rules requiring UK national debt as a share of the economy to fall and to be on course for a budget surplus. In the Government's spring statement, Chancellor Rachel Reeves said state finances were on track to give a headroom worth around £9.9 billion by 2029/30. Niesr's forecasts suggest this could now be set for a shortfall of £62.9 billion over this time frame, suggesting the Treasury could need to look at more spending cuts or tax increases to achieve a surplus. Stephen Millard, Niesr interim director, said: 'The Chancellor's self-imposed and arbitrary fiscal rules have led to a situation where twice a year the Chancellor has to either find further departmental savings or announce politically unpalatable tax rises. 'The uncertainty created by this leads to low investment and lower growth, the precise reverse of what the government wants to achieve. We have to rethink the fiscal framework.' The organisation's fiscal outlook also pointed towards rising inflation for the year, which it expects to average 3.3% in 2025. Previously, Niesr had predicted it would average 2.4% for the year, with a peak of 3.2%. It is the latest body to trim back the UK's economic growth contexts amid pressure from changes to US tariff policies on the global economy. Last month, the International Monetary Fund (IMF) cut its UK growth forecast by 0.5 percentage points to 1.1% for this year. Adrian Pabst, deputy director for public policy at the organisation, said: 'The Government's ambition of boosting growth and living standards in every part of the United Kingdom requires a comprehensive, credible plan of economic transformation which is yet to emerge. 'While planning reform and infrastructure investments in London and the South East will add to GDP growth, we need higher public investment in second-tier cities and poorer regions to unlock greater business investment.' The Conservatives meanwhile accused Ms Reeves of 'playing fast and loose with the public finances'. Shadow chancellor Mel Stride added: 'She should have learned lessons after she was forced into an emergency budget in March. 'Now she is once again teetering on the edge of breaking her own fiscal rules. 'This inevitably means rising speculation about further painful tax rises come the autumn, all at a time when businesses are in desperate need of certainty, and households are worried about rising bills.'
