Policymakers urge Rachel Reeves to tax wealthier pensioners to stabilise public finances

"In a letter to the Chancellor, signatories including Lord Gus O'Donnell, the former cabinet secretary, and Lord Jim O'Neill, the former Treasury minister, argued that the government should reform property and wealth taxes to ensure "better-off older people" make a greater contribution to funding health, social care and pensions. The letter, also signed by high-profile economists Mariana Mazzucato, Mohamed El-Erian, Sir Anton Muscatelli, Simon Wren-Lewis and Jonathan Portes, warned that the UK's fiscal position is "not sustainable" without structural changes to the tax base."

"The Chancellor is facing a deficit of between £20bn and £30bn against her main fiscal rule, which requires day-to-day spending to be funded by tax revenues rather than borrowing. Some estimates suggest the shortfall could reach £40bn once weaker growth and productivity forecasts from the Office for Budget Responsibility are factored in. Reeves has already ruled out raising VAT, national insurance or income tax, but the letter warned that "progressive, pro-growth options" remain, particularly around wealth, property and pensions."

"The economists argued that the only route to fiscal sustainability lies in boosting long-term growth, and called on Reeves to significantly increase public investment rather than allow it to remain flat as a share of GDP over this parliament. They also backed reforms to the fiscal framework, including the International Monetary Fund's recommendation to move to a single Office for Budget Responsibility forecast each year, to avoid policy volatility."

Senior policymakers and economists urge reform of property and wealth taxes to secure greater contributions from better-off older people and homeowners to fund health, social care and pensions. A letter signed by leading figures warns that the UK's fiscal position is unsustainable without structural changes to the tax base. The Chancellor faces a gap of roughly £20bn–£30bn against her main fiscal rule, with some estimates pushing the shortfall toward £40bn when weaker growth and productivity forecasts are included. Reeves has ruled out raising VAT, national insurance or income tax, while Treasury officials consider stamp duty and council tax reforms. Economists recommend boosting long-term growth through significantly higher public investment and reforming the fiscal framework, including moving to a single annual OBR forecast to reduce policy volatility.

Read at Business Matters