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Britain’s new Labour government is facing the possibility of needing to raise taxes by 20 billion pounds in its upcoming budget to prevent cuts to public services, according to the Resolution Foundation. The think tank suggested that redefining public debt could allow for long-term investment while still adhering to debt reduction promises.
The Resolution Foundation proposed defining debt in terms of public sector net worth, which could potentially unlock an additional 50 billion pounds for investment. This approach, though initially met with concerns about tax hikes and borrowing, aims to ultimately improve public services, build new infrastructure, and boost economic growth.
Official data revealed a slight increase in economic output in August, but surveys indicate lower confidence among businesses and consumers, with fears of potential tax increases looming. The Institute for Fiscal Studies estimated a need for a 25 billion pound tax increase to reverse the squeeze on public services left by the previous Conservative government.
To address the financial gap, Finance Minister Rachel Reeves is considering measures such as eliminating inheritance tax exemptions, raising capital gains tax, and introducing a social security levy on employers’ contributions to workers’ pensions. Labour has vowed not to raise taxes on “working people” or main tax rates like income tax, value-added tax, National Insurance, and corporation tax, which collectively generate a significant portion of tax revenue.
Overall, the budget on October 30 will play a critical role in setting the fiscal trajectory for the new government and determining the path for public services, investment, and economic recovery.
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Emma Collins, graduated in Financial Economics from the University of Chicago in the USA in 2016. She has since worked at an asset management firm in New York, where she specializes in investment strategies and portfolio management. Emma has a keen interest in financial analysis and has published several articles in renowned financial journals. Her work focuses on providing actionable insights to investors, and she is known for her forward-thinking approach to managing financial portfolios.