Latest news with #publicfinances
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The Independent
9 hours ago
- Business
- The Independent
‘Raising taxes is political suicide': Readers tackle uncomfortable truth behind UK's growth slump
As Chancellor Rachel Reeves prepares to deliver her first major Spending Review, Independent readers have weighed in on one of the thorniest issues in British politics: how to restore the UK's fragile public finances. A new warning from the OECD urging Reeves to act quickly – with a mix of tax rises, spending restraint and welfare reform – has reignited debate about the long-term sustainability of the nation's economy. It comes amid rising borrowing, downgraded growth forecasts, and geopolitical tensions, including Donald Trump's revived trade war and pressures to dramatically increase defence spending. The discussion has sharpened as the government faces calls to find billions to protect benefits and pensions, while also making the country 'war ready' with a potential jump in defence spending to 3 per cent of GDP. But where should that money come from – deeper cuts to services or higher taxes? In the comment section, readers explored whether the current tax system is fair, whether austerity has run its course, and if bold moves like taxing wealth, equity, or luxury goods could be part of the solution. Others warned that without more efficient public spending, no amount of tax will be enough. Here's what you had to say: Raise taxes or continued austerity Two choices really: either raise taxes significantly, or continue mild austerity – limits to public services spending (and quality), and small cuts here and there to welfare spending. The problem with raising taxes is we are already taxed quite heavily in the UK, and further increases will hit people's spending and economic growth... unless, of course, only the wealthy are targeted for tax rises – but good luck with that. ChrisMatthews Money is not the issue – resources are It makes no sense to discuss national spending and budgets in terms of money. That works for individuals (to whom money has value), but not for nations (since all the money possessed by one member is a liability of others... it has net zero value to the nation*). We need to talk in terms of productive/economic resources and start from the obvious point: they are finite. Allocating more resources to e.g. housebuilding (essential) means fewer available for other uses – no matter who builds the houses, public or private sector. That means we will, on average, be worse off in the short run, in terms of personal spending. Discussion in terms of money makes it all seem like our personal budgets... that leads to seriously wrong thinking. *Unless it is foreign money, which has value to the nation. much0ado Wealth inequality is getting worse Bearing in mind the shift in wealth distribution: 1995–1998: The top 10 per cent held 47 per cent of total wealth, while the bottom 50 per cent held 9 per cent. 2020–2022: The top 10 per cent now hold 57 per cent of total wealth, while the bottom 50 per cent hold just 6 per cent. (ONS, Wealth and Assets Survey) The UK should seriously consider some form of wealth taxation. There are several economies that have this; the UK could look at how effective this form of taxation is, and what the drawbacks are. I'm not saying the UK can't work something out for itself, but the track record isn't great – in anything. wolfie The poorest pay a greater share of tax Taken from the Equality Trust using ONS figures: "The poorest 10 per cent of households paid on average 48 per centof their income in tax in 2022/23. The richest 10 per cent of households, however, paid on average just 39 per cent of their income in tax. Council tax is a key source of disproportionate taxation, with the poorest 10 per cent paying 7 per cent while the richest 10 per cent pay just 1.2 per cent. Similarly, VAT hits the poorest harder, with the poorest 10 per cent paying 12 per cent while the richest 10% pay just 3 per cent. The post-tax income for the richest 10 per cent is £112,874 – over 12 times higher than the poorest 10er cent's post-tax income of £9,651.00." We really can't afford to support the lifestyles of the mega-wealthy. TalkingSense Taxes are already too high Labour has already raised taxes above what was already the highest ever level in history. Such ever-higher taxes lead to ever-lower growth, and even declining GDP. Taxes need to be cut, and health and welfare overspending cut back. Mark Look to Scandinavia Our party system has failed. And capitalism itself has failed. But at least Scandinavian countries have the sense to employ much fairer and more humane versions of it. As the quality of life in those countries incontrovertibly proves, including their health systems, social services, benefits, and transport systems. Cyclone8 Minimum wage What politicians avoid discussing – including Farage and Starmer – is whether taxation is equitable in the UK, and whether the UK government spending so much on top-up benefits could be reduced by raising the minimum wage and making sure it's enforced. forum Cutting benefits unacceptable Cutting benefits is an unacceptable method of balancing the books. Taxing the rich is currently impossible unless done in a coordinated global way. The only things left – as we are already being ridiculously austere –are to have the middle classes carry the burden and continue to make savings via management of immigration. BigDogSmallBrain Tackle public sector inefficiency I think taxes have been raised enough, and it's high time public sector inefficiencies are addressed. Of course, with a governing party beholden to the unions, this is very unlikely. Ian Robinson Hyper-luxury VAT could help A 100 per cent VAT on private jets, luxury yachts, caviar, Ferraris, handbags that cost more than the average weekly shop, diamond tiaras, and hundreds of other hyper-luxuries would benefit the many and impact the few. If you can afford a third home, a fourth holiday, or a private chef, you can afford to pay a lot more in taxes. FishPapp People want services, but not taxes The problem, as I see it, is that people want a nice country. They want public services, clean streets, no potholes in the roads, healthcare, police, fire brigade, etc. But they don't want to pay for it. Hence why raising taxes is political suicide. ChopperBill Tax property equity to cool the market They could tax property equity – it would lower house prices, making them more affordable. The owners won't be going anywhere for the sake of a few percentage points. But it needs bravery and vision. What the UK lacks is someone capable of selling it to the public. NotRedorBlue Want to share your views? Simply register your details below. Once registered, you can comment on the day's top stories for a chance to be featured. Alternatively, click 'log in' or 'register' in the top right corner to sign in or sign up.
The Independent
11 hours ago
- Business
- The Independent
Reeves to stick to fiscal rules amid budget wrangles ahead of spending review
Rachel Reeves acknowledged she had been forced to reject calls for funding for 'good' projects as she refused to loosen the rules governing her stewardship of the public finances. The Chancellor has been involved in wrangles with Cabinet colleagues over departmental budgets ahead of next week's spending review. She insisted her self-imposed 'fiscal rules' were 'non-negotiable' because she would not risk the economic chaos that could be caused if the markets lost faith in her ability to control spending. The Chancellor said the combination of tax hikes she has already unveiled and the changes to the way borrowing for investment is accounted for meant £300 billion extra was available over the coming years. But she acknowledged this was not enough to meet the demands made by ministers. She said: 'Not every department will get everything that they want next week and I have had to say no to things that I want to do too.' But, she added: 'That's not because of my fiscal rules. It is a result of 14 years of Conservative maltreatment of our public services, our public realm and of our economy.' She said there were 'good things I've had to say no to' but 'the reason for that is because it is important to have control of the public finances'. Ms Reeves denied she would be forced into mounting another massive tax raid in order to meet her fiscal rules, which include a promise to match day-to-day spending with revenues. She said: 'We made decisions in the budget last year to increase taxes by £40 billion. 'We have absolutely no intention of repeating a budget on that scale again.' And she rejected claims that a squeeze on the Home Office budget – reportedly one of the departments holding off on agreeing a deal with the Treasury – would damage policing. In a letter to the Prime Minister, Sir Mark Rowley, the head of the Metropolitan Police, warned that cuts to police budgets will have 'far-reaching consequences'. Asked about warnings from Sir Mark and other policing leaders, the Chancellor said: 'We will be increasing spending on police in the spending review next week, so that's not a decision or a choice that I would recognise.' Ms Reeves was speaking in Rochdale as she confirmed plans to tear up Treasury Green Book rules to help fund billions of pounds of investment in cities across England. The £15.6 billion package for mayoral authorities included funding to extend the metros in Tyne and Wear, Greater Manchester and the West Midlands, along with a renewed tram network in South Yorkshire and a new mass transit systems in West Yorkshire. Green Book rules have been criticised in some quarters for favouring investment in London and the South East. The move means more money for areas of the North and Midlands, including the so-called red wall, where Labour MPs face an electoral challenge from Reform UK. Ms Reeves said: 'The choice is already clear: Where Reform and the Conservatives would gamble with Britain's future, Labour will invest in that future. 'Where they offer chaos, Labour offers stability. 'Where they offer decline, Labour offers investment. 'And where they offer more of the same, we offer change; change that we can now deliver because of the choices we have made.' The investment announced on Wednesday includes £2.4 billion for the West Midlands to fund an extension of the region's metro from Birmingham city centre to the new sports quarter, and £2.1 billion to start building West Yorkshire Mass Transit by 2028. Greater Manchester will receive £2.5 billion for projects including new tram stops in Bury, Manchester and Oldham and an extension of the tram network to Stockport. A £1.5 billion investment in South Yorkshire will include £530 million to renew the region's trams, while the East Midlands will receive £2 billion to design a new mass transit system between Derby and Nottingham. In the south, the west of England will receive £800 million, including £200 million to develop mass transit links between Bristol, Bath, South Gloucestershire and north Somerset. Shadow Treasury minister Gareth Davies said the transport plans were repeats of promises made by the previous Conservative administration. He said: 'Rachel Reeves is scrambling to salvage her failing economic plan after the Prime Minister has made U-turn after U-turn, punching holes in her credibility. 'She needed to do better than copying and pasting announcements made by the previous Conservative government. The country is not falling for their lies anymore. Britain deserves better.'
Telegraph
14 hours ago
- Business
- Telegraph
Live Starmer to face Badenoch at PMQs
Sir Keir Starmer is set to face Kemi Badenoch at Prime Minister's Questions as the Government faces pressure on multiple fronts. The Prime Minister will clash with the Tory leader ahead of next Wednesday's Spending Review which is expected to see Rachel Reeves announce real terms cuts to Whitehall budgets. Mrs Badenoch could opt to focus on the state of the public finances or she could seek to capitalise on the uncertainty surrounding Labour's defence plans. Sir Keir unveiled the Government's Strategic Defence Review on Monday and recommitted to increasing defence spending to 2.5 per cent of GDP by 2027, with an 'ambition' to hit 3 per cent by 2034. But the Prime Minister's plans were plunged into chaos after Nato demanded the Government spend 3.5 per cent of GDP on defence. Meanwhile, the Government continues to face questions over exactly when it will change the eligibility criteria for pensioners claiming winter fuel payments. Rachel Reeves, the Chancellor, said this morning that Labour's about-turn would take effect in time for next winter but the exact details of how the support will be opened up to more people remains a secret. You can join the conversation in the comments section.
Reuters
15 hours ago
- Business
- Reuters
UK's Reeves says no plans to raise taxes on scale of 2024 budget
LONDON, June 4 (Reuters) - British finance minister Rachel Reeves said on Wednesday the government did not have any plans to announce tax hikes on a scale similar to the 40 billion pounds ($54 billion) of increases introduced in last year's budget in October. "I have absolutely no intention of repeating a budget on that scale again," she told a press conference in northwest England, where she announced investments in regional transport projects. Reeves said her Oct. 30 tax rises had been necessary to repair the public finances but that they were now on a "firm footing". She will present a spending review next week, setting out the budgets for government departments for the rest of the parliamentary term. ($1 = 0.7390 pounds)
The Independent
16 hours ago
- Business
- The Independent
Labour ‘at war' over Reeves' spending review amid fears manifesto pledges will be ditched
Rachel Reeves is facing a cabinet revolt over her spending review amid fears departmental cuts will lead to key manifesto spending promises being ditched. In what is being described as a 'proxy war', the chancellor is facing a push to consider taxes on the wealthy instead of cuts before she outlines her government spending plans next week. Room for manoeuvre is further restricted by an expectation that the government will U-turn on cancelling winter fuel payments for millions of pensioners, as well as ending the two-child benefit cap, which could cost Ms Reeves as much as £5bn. The row follows reports that major departments, including Yvette Cooper's Home Office and Angela Rayner's Ministry of Housing, Communities and Local Government, have still not settled on an agreement for the spending review due to be unveiled on Wednesday 11 June. There was some good news with reports that education secretary Bridget Phillipson had agreed her department's spending envelope with a week to go. But the holdouts come despite the Treasury setting an unofficial deadline of last weekend to agree. The mounting pressure on the chancellor comes as former Treasury adviser Jim O'Neill told Ms Reeves that she needs to borrow more for major projects to kickstart growth, as the latest forecasts have seen another downgrade for the UK economy, leaving the chancellor with less wiggle room. And there are fears that a further squeeze on public finances will open the door for Nigel Farage 's populist Reform party to seize power. On Tuesday night, The Times reported on a letter sent by police chiefs to Sir Keir, warning of 'far-reaching consequences' of cuts to forces. The OECD on Tuesday downgraded its estimate for the UK's economic growth this year to 1.3 per cent, from 1.4 per cent, and to 1 per cent, from 1.2 per cent, in 2026. Meanwhile, the government's pledge to increase defence spending to 3 per cent of GDP has been complicated by Nato's decision to tell member states, including the UK, to hike it even further to 3.5 per cent. A senior Labour source told The Independent that the chancellor's decisions over the next week will 'see the ending of a number of manifesto pledges as actually being deliverable'. With Ms Reeves already being accused by critics of trying to bring in ' austerity 2.0 ', it is understood that a growing number of Labour MPs and trade unions are now pushing for her to introduce wealth taxes instead. The idea featured in a leaked memo from Ms Rayner, in which the deputy prime minister proposed eight different wealth taxes, including increasing dividend tax rates for higher earners and targeting property traders who use corporate structures to avoid stamp duty. A senior Labour source told The Independent: 'I think the spending review is becoming a proxy war to desperately try and stop Labour facing an existential crisis – the breathtaking collapse in support continues, and [the plan for the party is to] just try and deliver some of its manifesto so that ordinary voters can see and feel that they have.' They added: 'I cannot see how Rachel Reeves lasts.' With fears that cuts will mean having to row back on promises on border control, policing, housing and social care, the source warned: 'I think this spending review will realistically see the ending of a number of manifesto pledges as actually being deliverable.' Ms Reeves's strict rules on borrowing and her refusal to increase income tax, VAT or employee national insurance, there are concerns within Labour that 'the fiscal rules are destroying Labour politically and on delivery of their agenda". But the biggest fear is that a new wave of austerity will hand Nigel Farage and Reform UK power. The senior source noted: 'People are starting to get real and get vocal. People are realising the Reform threat is not just a crazy blip. It could be the legacy of this Labour government that they usher in the first far-right government in Britain's history. That cannot be allowed to happen.' Meanwhile, Lord O'Neill has warned that she will have to borrow more to kickstart growth. The economist urged her to invest in major projects he dubs 'big positive multipliers', such as Northern Powerhouse Rail or small modular nuclear reactors. The investment is expected to be the subject of a major speech by the chancellor tomorrow as she tries to regain the initiative. However, the government is still struggling to explain how it plans to pay for defence pledges made in its strategic review on Monday. The 3 per cent of GDP on defence by 2034 pledge has been downgraded to 'an ambition', but now Nato's new general secretary Mark Rutte is set to put up a proposal for the next summit of the defence bloc for all members to pay 3.5 per cent. One senior insider said Britain would 'without a doubt' sign up, but was unable to say where the money would come from. On Tuesday, defence secretary John Healey failed to rule out tax rises to make Britain 'battle-ready'. He said the government would 'set out how we'll pay for future increases in the future' when quizzed over how Britain can afford to boost its military funding to 3 per cent. Mr Healey said he is '100 per cent confident' the target would be met – but he struggled to say how it would be paid for after economists warned that significant tax rises would be needed.
