Sat, 12 Jul 2025

Sat, 12 Jul 2025 Faisal Islam: We are heading for significant tax rises

Repeatedly borrowing more is not a long-term solution to rising day-to-day spending pressures.

* The UK economy shrank for a second consecutive month in May, according to new figures.
* The Office for Budget Responsibility (OBR) has warned that Britain faces "daunting" risks, including soaring government debt that could reach three times the size of the economy by 2075.
* OBR boss Richard Hughes said the UK cannot afford the promises made to the public and cited a pattern of U-turns on tax and spending changes.
* The UK now has the sixth highest debt and fifth highest annual borrowing among advanced economies, making it vulnerable to future crises.
* Local councils are struggling with ballooning social care costs, while the promise to increase defence spending will cost nearly £40bn per year by 2035.
* The OBR's report is a "polite plea" for realism about the choices ahead and warns that repeated borrowing is not a long-term solution to rising day-to-day spending pressures.
* Chancellor Rachel Reeves may choose to rebuild the "headroom" to give her a better chance of meeting her self-imposed borrowing limits, but significant tax rises are likely in this autumn's Budget.
* The expected further freeze on income tax thresholds will not be enough, and wealth taxes, such as property and inheritance taxation, are being considered.
* Robust economic growth is needed to smooth the way for the Treasury's plans, but there are some signs of perking-up in confidence levels.
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