Tue, 05 Aug 2025

Tue, 05 Aug 2025 Taxes must rise to meet target, says thinktank

The chancellor will miss her self-imposed rules without action, the National Institute for Economic Affairs says.

* The National Institute of Economic and Social Research (Niesr) said the government was on track to miss its target by £41.2bn.
* A moderate but sustained increase in taxes is recommended, including reform of the council tax system.
* Niesr argues that raising taxes would help build a "buffer" that would reassure investors about the stability of the UK's public finances.
* The thinktank says the £41bn shortfall in the government's budget was due to weakening growth and the reversal of welfare cuts.
* Chancellor Reeves is facing a "trilemma" over which of her pledges to fulfill: meeting her spending commitments, avoiding tax rises on working people, or meeting borrowing limits.
* Niesr recommends prioritizing public expenditure that supports vulnerable groups and safeguarding public investment for future growth.
* The thinktank says the government's other priority should be policies to promote growth and productivity.
* Niesr estimates economic growth will be 1.3% in 2025 and 1.2% in 2026, with inflation at 3.5% this year and 3% next year.
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