Latest news with #taxRises
Daily Mail
a day ago
- Business
- Daily Mail
IFS torches Rachel Reeves' spending plans warning NHS and defence will need topping up and cost-cutting drive is 'not serious' - leaving tax rises 'almost inevitable'
The IFS delivered a withering assessment of Rachel Reeves ' spending plans today warning that tax rises look 'almost inevitable'. The think-tank's director Paul Johnson said he would be 'very surprised indeed' if heath and defence funding did not need topping up before the next election. Despite Labour 's splurge, he also cautioned that schools spending looked extremely 'tight' as special needs provision demand grows. The IFS's post-mortem of yesterday's Spending Review also ridiculed the government's claim to have identified billions of pounds in 'efficiencies' during a 'zero-based' overhaul of costs. Mr Johnson pointed out that all departments had been pencilled in for exactly the same percentages of back-office cuts, suggesting it was not a 'serious' exercise. 'Ms Reeves is now going to have all her fingers and all her toes crossed, hoping that the OBR will not be downgrading their forecasts in the Autumn,' he said. 'With spending plans set, and 'ironclad' fiscal rules being met by gnat's whisker, any move in the wrong direction will almost certainly spark more tax rises.' Despite Labour 's splurge, the IFS cautioned that schools spending looked extremely 'tight' as special needs provision demand grows In the Spending Review yesterday, Ms Reeves set out plans to 'invest' a staggering £4trillion to fund 'the renewal of Britain'. She said the plans, which include another huge dollop of cash for the NHS, would end the 'destructive' austerity of the last government and boost economic growth. Labour strategists hope the costly gamble will pay off by cutting hospital waiting lists, improving the creaking infrastructure and pump-priming the economy. However, Ms Reeves' plans were immediately thrown into chaos today after figures showed the economy tumbling into the red. GDP was down 0.3 per cent in April, worse than analysts had expected, and raising more questions about the realism of the Chancellor's splurge on services. Although UK plc has still grown over the past three months, evidence has been mounting of a slowdown. Ms Reeves admitted the data - which coincide with the huge national insurance tax raid on businesses taking effect - were 'disappointing'. In a round of broadcast interviews, she pointed the finger at 'uncertainty' surrounding Donald Trump 's trade tariffs. But Ms Reeves again avoided ruling out more tax increases at the Autumn Budget, instead arguing that the plans she laid out yesterday - based on healthier economic forecasts - were 'fully funded'. 'The world is very uncertain at the moment so I am not going to write Budgets for the future,' she told Sky News. At the IFS briefing this morning, Mr Johnson said: 'Health spending nearly always gets topped up. Growth of 3 per cent a year is below the historic average. 'It may not even prove enough to fund the official workforce plan and it is at best marginal whether it will be enough to achieve the government's waiting list targets. 'Defence spending is rising to 2.5 per cent of national income by 2027, but no increase thereafter. 'Given external demands and government promises to get it to 3 per cent of GDP at an unspecified date in the next parliament there will be pressure to increase it further. And that's before any increase in the NATO spending target to more like 3.5 per cent, which this government would presumably feel under some obligation to move towards.' Turning to the education budget, Mr Johnson highlighted that outside of extra spending on free school meals it is 'essentially flat in real terms'. 'Falling pupil numbers should give some room for manoeuvre and result in a modest real increase in per pupil funding, but absent some serious cost-saving reforms, ever growing spending on special educational needs is likely to swallow much – or perhaps all – of that funding growth,' he said. The IFS also sounded alarm about the prospect for unions to force more bumper pay hikes out of Labour. 'With day-to-day budgets growing so slowly there is not going to be much room for further significant increases in public sector pay,' Mr Johnson said. 'Perhaps last year's increases followed by a period of rises broadly in line with inflation will be enough to keep peace with the unions, and to recruit and retain as necessary. If not there could be trouble ahead.' He also raised doubts about the Home Office's ability to end spending on asylum hotels, and said the Treasury's reserve has been 'pared right back'. That left 'little space to deal with unforeseen pressures'.
The Independent
03-06-2025
- Business
- The Independent
Defence secretary fails to rule out tax rises to fund defence spending uplift
The defence secretary has failed to rule out tax rises to pay for Britain's 'war readiness' amid concerns that the government does not have enough money to fund the plans outlined in a major defence review. John Healey 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 of the country's gross domestic product. Speaking a day after Sir Keir Starmer unveiled the long-awaited defence strategic defence review, 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. Questions have been raised over the government's big ambitions to make Britain 'safer and stronger' after Sir Keir refused to commit to hitting the 3 per cent target by 2034 — which the review warned was essential to ensure the plans were affordable. Asked how the government would pay for the uplift, Mr Healey failed to rule out tax rises. He told Times Radio: "We'll set out how, just as we've done with our 2.5 per cent commitment where we have made that tough decision to switch money out of overseas development aid into defence - because that's the priority to meet the threats that we face as a country, that's the priority for building up our armed forces.' 'We'll set out how we'll pay for future increases in the future', he added. On Monday, Sir Keir declined to rule out another raid on the aid budget to fund increased defence spending, and signalled he was hopeful that the extra investment could be supported by a growing national economy. Mr Healey also indicated the government is gambling on economic growth to pay for the plans, telling BBC Breakfast that growth is 'the way that we are able to pay for the things that we need to do and we want to do as a country'. 'For 14 years under the Tories, we've had a failure on economic growth', he said. 'We've got a chance during the government now starting to fix the foundations of that economic growth. We've had four interest rate cuts since the last election. 'We've got the fastest growing economy in the G7 now, and we've had the Office of Budget Responsibility revising up their growth forecasts because of the actions that this government is taking. 'So I'm confident that's going to give us the basis hit our 3 per cent in the next parliament.' It comes after Paul Johnson, of the Institute for Fiscal Studies (IFS), warned that the prime minister will need to make 'really quite chunky tax increases' to pay for the plans. He told Times Radio: 'It looks like the government wants to reinstate the winter fuel payment. It's thinking about the two-child limit for benefits. We've got a spending review next week. 'And if we are really going to spend another £10-£15bn a year on defence, whilst inevitably we're going to spend more and more on health and pensions and so on, you really do have to ask that question, what are the choices that you're going to make?' Mr Johnson added: 'I mean, bluntly, it really does seem to me that the only choice that is available, if we're going to go through all of those things, is some really quite chunky tax increases to pay for it. 'But of course, that's not something the prime minister or the Chancellor is willing actually to say.' Unveiling the long-awaited SDR on Monday, Mr Healey said Britain's army needed to become '10 times more lethal' in the face of the 'immediate and pressing threat" from Russia and the rise of China. 'We are in a new era of threat, which demands a new era for UK defence,' he told MPs. The government has promised to increase defence spending to 2.5 per cent of gross domestic product (GDP) by 2027, and has an ambition – but no firm commitment – to hike it to 3 per cent in the next parliament. With a backdrop of 'turbulent times' and a promise to learn lessons from the Ukraine conflict, the report even warned 'it may be necessary to go faster' on increasing the UK's defence capabilities. The review found that the armed forces are not ready to fight opponents like Russia or China, with inadequate stockpiles of weapons, medical services that cannot cope with a mass-casualty conflict and a personnel 'crisis' that means only a small number of troops are ready to be deployed. One of its authors, General Sir Richard Barrons, warned that a cruise missile was 'only 90 minutes away from the UK'. Sir Keir said: 'Russia is already menacing our skies and our waters, and threatening cyber-attacks, so this is a real threat we're dealing with.' Unveiling the details of the review, the prime minister said he was "100 per cent confident" the plans to make Britain 'ready for war' could be delivered on current funding plans.
