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The country is just days away from hearing Labour’s first Budget since coming into power, as speculation mounts around what measures could be making the cut.
Tax rises have been confirmed by Labour, with Keir Starmer telling reporters he would defend them “all day long.” Both the PM and chancellor Rachel Reeves have reiterated the party’s message that “tough decisions” are needed for economic growth.
Experts predict these will come in the form of increases to taxes like capital gains, employer national insurance, and freezing income tax.
But there are several other tax-raising measures that some are hoping for, but know are unlikely to come.
Here’s your guide to what probably won’t be announced in the Budget on 30 October.
Higher taxes on ‘working people’
This one should come as no surprise. In the weeks leading up to the election, Labour ministers have strained to reiterate the party’s manifesto commitment to not raise taxes on “working people”.
This is spelt out to mean increases to income tax, VAT or national insurance contributions (NICs). However, tax rise rumours have sparked a debate about what else might constitute a tax on working people.
A small increase to employers’ NICs is thought to be under consideration by Ms Reeves, with a 1 per cent increase raising up to £8.5bn a year, according to HMRC analysis in June.
Although this is a levy charged on employers, the Institute for Fiscal Studies (IFS) has said it would effectively be a tax rise on workers as the charge is likely to impact wages.
Critics have also called into question rumoured plans to raise capital gains tax, which is a levy on the sale of assets such as shares or property. Pressed on the issue, the prime minister clarified that people who make a profit in this way do not fall within his definition of “working people”.
Council tax reform
Labour ruled out making changes to council tax bands before the general election, meaning it is unlikely we’ll see a re-evaluation announced on Wednesday.
However, experts have pointed out that the party did not rule out adding more bands to the top of the scale, which could account for higher-value properties.
Several campaigners have long called for a reform to the council tax banding system, as the values are still based on the property prices in 1991.
Research from the Centre for Cities shows that re-evaluating these bands every year, alongside adding more to the top, could save the average household £494 a year without losing any money for the exchequer.
Wealth tax
A ‘wealth tax’ is a levy targeted at the very wealthy – usually those with assets exceeding £10m. Ms Reeves ruled out the measure before July’s general election, adding: “I don’t see the way to prosperity as being through taxation. I want to grow the economy.”
In the weeks before the Budget, a cross-party alliance of 30 MPs and peers have called for a tax on “extreme wealth”. In a letter to the chancellor, they demand a new 2 per cent tax on assets worth over £10m, which they claim could raise £24bn a year.
Despite Labour’s unexpected shortfall in public spending, any form of wealth tax remains unlikely. There is very little international precedent for the measure, and models abroad have proved largely ineffective.
Speaking at the start of October, new Labour MP and former chief executive of the Resolution Foundation think tank Torsten Bells said: “We have got a lot of wealth taxes already, like inheritance tax, capital gains tax, stamp duty.
“Sort out those taxes is the first way you officially start taxing wealth, stop dreaming of your wealth tax because you are just going to waste years.”
‘Sin’ taxes
A “sin tax” is one placed on goods that are deemed harmful in some way. A recent report from the IPPR proposed this on unhealthy food, with a 10 per cent tax on “food categories including processed meat, confectionary, cakes and biscuits”.
The researchers predict this would raise £3.6bn in the first year, and has been proven to work by similar models which have found success in Hungary and Mexico.
Another similar measure could come in the form of increased taxes on gambling – either on winnings or on suppliers. Combined, these measures could raise up to £5.9bn.
However, Labour has not floated introducing any taxes like these three and, combined with the crackdown on smoking and vaping, may want to avoid more measures which could be seen as policing personal choices.
Source: independent.co.uk
