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When UK Chancellor Rachel Rivz announced its government budget last fall, submitting an increase of £ 70 billion ($ 95 billion) for state expenses funded by higher borrowings, and 40 billion pounds that are mostly affected by British “Legislator,” “we’re not going to return with greater taxes, or really more export.”
However, the times have changed, and when the shi is trying to balance the books and follow its stated not necessary “Fiscal rules” – during the persecution costs for public services Among the uncertain economic worldview – it may not have a choice but to accept more, unpopular tax.
In the spring, the Treasury had about 9.9 billion pounds of limited tax stock to reach its main financial goal for everyday costs funded by tax revenues rather than borrowing.
Since then, the economic and financial outlook has become more difficult, but with higher payments on the interest and weaker than expected, tax revenues are converged with less economic growth forecasts.
Administration on budget liability (OBR) stated In March What expects the UK fixes by 1% in 2025 and 1.9% in 2026. OBR is an independent economic and financial forecaster that evaluates government budgets to find out whether they can meet or miss their financial goals.
According to economists, this last growth outlook looks optimistic, and if OBR revisits its 2026 forecasts below, it will leave a great dent – if not quite destroyed – the government’s fiscal stock.
This means that the government with three options: reduce costs, increase borrowings or taxes.
Increasing taxes at the end of this year becomes more inevitable, say economists, and shizo already Belonging to enhancement of public services and key departmental budgets In his examination of the costs on Wednesday and follow his mantra that daily state expenses will not be funded by borrowing.
Tax increases “mustache gnat”
“We believe that this year’s” headline “is completely evaporated, and that the tax is increasing, look more and more inevitable this year,” said James Smith, a developed ENG market economist, in the comments by email.
The forecast that if OBR revised its growth forecast in 2026 to 1.5% in 2026, it would have halved the government’s state stock.
“Our script analysis shows that it may face a shortage of £ 4 billion as a result of economic winds, and perhaps much more than if the OBR forecast changes are more significant. This is before considering a broader tax and pressure on the expenses faced,” he added.
When asked by Sky News about whether she could increase the taxes this year, Reivz seemed reluctant to answer the question, saying that “she was not going to write budgets for the future.”
“I am not going to write another four years of the budget before we even went through the first year of this government,” she told the television company, although she admitted that “the world is very uncertain at the moment.”
These comments came after the rough awakening of the chancellor one day after examination – Previous monthly data on gross domestic product on Thursday suggested that the UK economy decreased by 0.3% in April every month.
British Chancellor Cassie Rachel Rivz leaves 10 Downing -Rate ahead of PMQ in the House of Commons in London, UK, June 11, 2025.
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Neither economic forecasts nor state finance improved compared to last year, according to Paul Johnson, the director of the Institute of Fiscal Studies, but “rather the opposite”.
“Reiva will now be crossed with fingers and all the toes, hoping that OBR will not lower their forecasts in the fall. With the established expense plans, and” Ironclad “fiscal rules, followed by the gnat mustache, any step in the wrong direction almost certainly causes more taxes,” it is almost certain. ”
“Nobody should doubt that the chancellor had some incredibly rigid decisions and balance actions for execution,” he added in the review analysis after issuing, noting that “fiscal restrictions are too real, and we cannot have everything we can want.”
Life will only be more difficult than the Treasury, because it is supposed to claim that it balances the act throughout the summer, and the clouds are already formed over the country’s growth.
Where the tax hiking may occur
The government has already abandoned some unpopular costs, the dismissal of winter pensioners-and this week has announced a large increase in public services and departmental costs, and health and protection acquire a billion pounds.
Cutting the costs on the unlikely and the mantra of Riva for not to resort to borrowing to finance everyday costs, the tax increase is the only real option.
This will violate the promise of Riva to avoid further capture of taxes, and violate the Labor Party manifesto, promising not to collect income tax, the contribution of national insurance (social security) or increase VAT, a tax that is added to most products and services.
Chancellor Shadow Rachel Rivz, Labor leader Sir Kire Starmer and Deputy Leader Angela Reeer, participate in the event to launch election promises at the behind -the -scenes center on May 16, 2024 in Perflet, UK.
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Currently, insiders of the Labor Party are afraid of months of speculation on where tax hiking, Mujtaba Rahman, head of the European Group Group, said on Thursday.
“The simplest fiscal route would be a violation of the Labor Labor Manifesto, so as not to collect income tax, national insurance for workers and Washington, but (Prime Minister Keir) does not want to do so, fearing the reaction over” violated promises “,” Rahman said in the e -mail.
Reivz is likely to deal with a few smaller scale, extending the current freezing for tax help and thresholds for another two years by 2030, he said.
Other options include a retirement tax limit for high salaries, raising £ 3 billion in gambling and up -to -date council tax based on the 1991 real estate values.
“There will be no simple answers to the Riva how to make her sums,” Rahman said.
