Is Labour Preparing Brits For A Tax Shock This Autumn?

Keir Starmer and Rachel Reeves Are our taxes about to go up?That’s a question Brits will be hearing again and again ahead of Labour’sautumn Budget, where the government sets out its spending and tax plans for the year ahead.Very rarely do ministers admit in any significant detail exactly what they have planned for the fiscal event – but early signs suggest that a tax hike just might be looming.The occupants of 10 and 11 Downing Street are stuck between a rock and a hard place when it comes to the country’s finances right now.Keir Starmer and Rachel Reeves promised not to increase taxes on “working people” in the run-up to the general election last year.While the exact definition of that phrase split public opinion, Labour said it means not raising income tax, employee national insurance or VAT.Of course, that wording came back to haunt the government at last year’s Budget when they revealed they were hiking employers’ national insurance contributions – and critics swiftly pointed out that employers are “working people”, too.Then the National Institute of Economic and Social Research (NIESR) think tank today predicted that Reeves will need to raise taxes to close a government spending gap on course to reach more than £40 billion.This is due to unexpectedly sluggish economic growth – GDP grew by 0.7% in the first quarter of 2025 but contracted by 0.1% in May – and higher-than-expected inflation – at 3.6% in June.To make matters worse, when Labour made its 2024 tax promises, it also pledged to oversee a period of significant economic growth which... has not really happened.So perhaps it is no surprise the NIESR claimed Reeves is facing “an impossible trilemma” – sticking to her fiscal rules while fulfilling her spending commitments and upholding her manifesto pledge not to raise taxes for working people.Tellingly, the prime minister refused to reiterate his commitment not to increase “working people” taxes on Wednesday.He told reporters he did “not recognise” the NIESR’s figures, adding: “But the Budget won’t be until later in the year – that’s when we’ll have the forecast and set out our plans.”He also steered the conversation away from taxes, telling reporters: “What’s really important is that I’m very clear about our focus, which will be on living standards and making sure that people feel better-off, partly because more money is coming into their pocket in the first place through better wages, and partly because we’re bearing down on costs like mortgages and other costs to everyday families.”Tory donor and former deputy chair of the party, Lord Ashcroft, took that to mean there will be “another U-turn” on Labour’s promises coming soon.But, increasing taxes on “working people” is not the only option for the government.Those on the Labour left are calling for a wealth tax, although cabinet minister Jonathan Reynolds called the idea “daft” just last month.Meanwhile, professor Stephen Millard, the NIESR’s deputy director for macroeconomics, told the BBC Radio 4′s Today programme that Reeves could look at reforming the council tax system.“Houses have not been revalued since 1991. The system is ripe for a complete reform,” he said. “The question there is whether reforming the council tax system, getting it right, would necessarily raise any additional money.“An alternative is to replace the whole thing with a land value tax, which is much fairer and which potentially could actually raise a significant amount of money.”But just what will Labour choose to do to fix our unsteady finances? Right now, it seems like it is anybody’s guess – including Labour’s.Related...Labour's Mixed Messages On Tax Leave Voters Dazed And ConfusedVast Majority Of Brits Back A Wealth Tax On The Super-Rich, Poll RevealsIs It Time For A Wealth Tax? Pressure Grows On Starmer To Ramp Up Charges On The Rich

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Is Labour Preparing Brits For A Tax Shock This Autumn?

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