Reeves must abandon 'rash' tax pledges, says think tank

Rachel Reeves needs to row back on her manifesto pledge not to raise income tax, national insurance or VAT, a leading think tank has said, as the chancellor seeks to fill a £30bn black hole at the Budget.

- MILLIE COOKE

The chancellor should “reject the path of least resistance” and consider rowing back on her “rash” commitment not to raise the three main taxes at the Budget, the Institute for Government (IfG) said, arguing Labour’s “unrealistic” approach to tax has left Ms Reeves reaching for “piecemeal changes”.

It comes amid a growing expectation that the Treasury will have to increase taxes by as much as £30bn in the upcoming Budget, as a result of sluggish productivity, government U-turns and higher than expected interest payments. It is understood that Treasury officials currently believe the Office for Budget Responsibility will lower its forecasts for productivity growth, which would mean an extra £20bn worth of tax rises would be required.

Another £5bn would be needed to pay for the government’s decision to row back on welfare reforms earlier this year, while a further £5bn is thought to be needed to pay for higher than expected interest payments. The black hole is likely to make it difficult for the department to commit to ending the controversial two-child benefit cap, despite growing pressure on the government to do so.