STORY
Prime Minister Andy Burnham could need tax rises worth up to £25 billion to fund Government spending commitments while continuing to meet the fiscal rules, according to an assessment by Capital Economics. The consultancy’s deputy chief UK economist Ruth Gregory said additional spending could reach £30 billion to £40 billion, creating pressure for substantial new revenue measures at the autumn Budget.
The calculation reflects commitments including higher defence spending, a large programme of council housebuilding and measures intended to reduce household costs. Burnham has said the Government will continue to follow its fiscal rules, limiting the extent to which additional day-to-day spending can simply be funded through borrowing. Capital Economics said households were likely to bear a significant share of any tax increases required to close the gap.
No package of tax rises of this size has been announced by the Government and the £25 billion figure is an independent forecast rather than Treasury policy. Burnham has committed not to increase the main rates of VAT, national insurance or income tax, which would restrict the Chancellor’s options if further revenue is required. The Government is due to set out its tax and spending decisions at the Budget on 28 October.