Reeves may target pensions and wealth next, warns IFS

Chancellor won't rule out more tax rises in autumn Budget

- KATE DEVLIN DAVID MADDOX

Pensioners and the wealthy could face a shock tax raid by Rachel Reeves at the autumn Budget if the worsening economic forecast fails to improve, leading economists have warned.

Paul Johnson, the director of the highly respected Institute for Fiscal Studies (IFS) think tank, raised concerns in his postspring-statement briefing that the chancellor had not left herself enough headroom in the public finances to withstand challenges to the economy.

In particular, the threat of Donald Trump imposing wideranging trade tariffs on top of the 25 per cent he announced on car imports yesterday has raised the possibility that Ms Reeves could be left with a black hole. It comes as the latest Techne UK tracker poll for The Independent revealed that Labour had lost two points in support in the immediate aftermath of Ms Reeves slashing benefits by £5bn in her spring statement.

Mr Johnson warned that the chancellor had left herself exposed to minor forecast changes and that there was a "good chance" she would need to raise taxes in October. "That risks months of speculation over what those tax rises might be - a raid on pensions, a wealth tax on the richest, another hike to capital gains tax?" Mr Johnson said he was concerned that pensions "look like a juicy place to go for a lot of money". He also warned that "mere speculation about increases can cause economic harm”.

The economist's suggestion of a wealth tax would help Ms Reeves to appease rising anger among Labour MPs and trade unions over the £4.8bn in welfare cuts she announced in her statement, amid warnings that her measures will leave the poorest £500 worse off instead of putting an extra £500 in people's pockets.

Such was the political anger over the impact of benefit cuts and the loss of money for carers that yesterday work and pensions minister Stephen Timms was forced to answer an urgent question in the Commons on the matter.