[ad_1]
British finance minister Rachel Reeves is facing pressure to announce a significant tax increase of around 25 billion pounds in her upcoming budget to support public services like prisons and police, according to the Institute for Fiscal Studies. The non-partisan think tank suggested that Labour’s proposed tax hikes of 9 billion pounds during the election campaign may not be sufficient to prevent government budgets from shrinking relative to the economy. Director Paul Johnson emphasized the need for increased taxes or borrowing to fund the chancellor’s plans for higher investment spending and public service funding.

The IFS highlighted that a 25 billion pound tax hike would be nearly 1% of national income, significantly larger than previous tax increases following changes of government. Reeves, who acknowledged the challenging state of public finances left by the previous administration, has expressed a commitment to changing budget rules to prioritize a balanced budget, excluding investment, rather than allowing a 3% overall deficit. Discussions on the definition of public debt are also underway, potentially allowing for 50 billion pounds more borrowing.

The prospect of tweaked rules leading to higher debt levels has raised concerns among foreign bond investors, with recent market volatility reflecting apprehension about potential risks in the gilt market. Reeves has assured the presence of “guardrails” around any additional borrowing to maintain market confidence. It is essential to have a stringent process to oversee the use of borrowed funds and ensure transparency in managing public finances, particularly to reassure gilt markets.

[ad_2]
SOURCE