Budget tax rises may be fiscal fiction' as pain delayed for election year, IFS warns

"Rachel Reeves has positioned Labour to fight the next general election with tax increases and spending cuts that resemble a work of fiscal fiction, an analysis by leading economists has warned. In its verdict on the chancellor's budget, the Institute for Fiscal Studies (IFS) said the chancellor had chosen a high-risk strategy by backloading her plans to start just before voters go the polls in 2029."

"Helen Miller, the thinktank's director, said the budget plans would involve near-heroic restraint in an election year and suggested that Labour may ultimately be forced to abandon some of its tax-raising measures or planned spending cuts. [It is] a backloaded set of tax rises that almost entirely delay the pain. It's reminiscent of the fiscal fictions of recent years. I hope this is a government able to deliver on its plans. But I have my doubts, she said."

"With Labour trailing Nigel Farage's Reform UK in the opinion polls, the IFS said Reeves's decision to freeze income tax and national insurance thresholds for an extra three years would hit workers in the pocket. By 2029, more than a quarter of all taxpayers are expected to be dragged into the highest income tax brackets. Basic-rate taxpayers will be expected to pay 220 more tax each year by 2029, while those on a higher-rate will pay 600 more."

The budget positions Labour to implement backloaded tax increases and spending cuts concentrated near the 2029 general election. The Institute for Fiscal Studies labels the approach high-risk and likely to require near-heroic fiscal restraint in an election year. A freeze on income tax and national insurance thresholds for three extra years will push over a quarter of taxpayers into higher tax brackets by 2029. Basic-rate payers face about £220 extra annually by 2029 and higher-rate payers about £600. Independent analysis shows most of the £77bn extra tax falls after April 2029. Late-parliament measures include a pay-per-mile EV levy from April 2028 and a £2,000 cap on salary-sacrifice pension contributions.

Read at www.theguardian.com