20 Mar 2025
Chancellor Rachel Reeves should consider increasing taxes at this month's Spring Statement, according to the Resolution Foundation.
The Foundation noted that the UK's economic outlook has declined markedly since the Budget last Autumn. Weaker growth and higher interest rate expectations look set to turn the UK's projected current surplus of £10 billion into a deficit of around £5 billion.
This is likely to mean either cuts to public services, welfare, or tax rises.
The Foundation warned that any changes to Personal Independence Payments (PIP) and incapacity benefits must be handled very carefully so that the system is improved and able to support people back into work.
Instead, the think tank said, the government should raise taxes to meet the fiscal rules.
It says that extending the freeze in personal tax thresholds by a further two years to 2029-30 would raise around £8 billion. Such a measure would not affect living standards and would be paid for by wealthier families, it added.
James Smith, Research Director at the Resolution Foundation, said: 'The Chancellor must act decisively to meet her fiscal rules.
'Crucially, she should avoid turning the Spring Statement into a 'sticking plaster' Budget, with long-term thinking on welfare reform undermined by the quest for short-term savings that could cause real harm.
'And with Britain's fiscal pressures more likely to intensify rather than fade away, continuing to rule out tax rises is going to make future Budgets even more challenging to deliver.'