EMB 0001 Reeves must slash tax again before next election if she breaks manifesto pledge, Tony Blair think tank warns
Rachel Reeves has been warned that if she breaks her manifesto promise and increases the budget, she must cut taxes again before the next election.
Sir Tony Blair’s think tank also said any tax increases, such as increasing VAT or income tax, should be accompanied by pro-business policies to break Britain’s “tax and spend cycle of disaster”.
The warning comes after the Chancellor warned the country that manifesto-busting sweeping tax rises were coming later this month and said “we all need to contribute” in an unprecedented pre-Budget speech.
The Tony Blair Institute has now called for any major tax rises to be temporary and warned Labor should move towards “targeted tax cuts” before the next election “when growth strengthens and civil service reforms deliver results”.
The group also called on the chancellor to “turn around” businesses “bruised” by last year’s Budget with measures that go beyond “the caution of the government’s first year in office”.
The Tony Blair Institute for Global Change (TBI) said tax-raising measures should be paired with pro-business reforms that embed growth into every major policy decision, making Britain a better place to invest, work and build.
He warns: “If the Chancellor opts for a larger revenue-raising step – particularly an increase in income tax or value added tax (VAT) contrary to the manifesto – he should make clear that this is temporary and conditional: a short-term measure to stabilize public finances, not a permanent change of direction.”
He added that as growth returns and public sector reforms take effect, the priority should be to reverse these increases, i.e. “turning short-term discipline into the basis of recovery and pre-election tax cuts”.
Planned changes to immigration policy and employment rights risk damaging the UK’s flexible job market, the TBI said in its report.
Ministers have been urged to preserve the five-year permanent settlement route for the skilled worker visa rather than requiring immigrants to spend ten years in the UK before applying.
It also proposes expanding access to and reducing the cost of the global talent visa, introducing a new “technology excellence” visa for engineers, founders and researchers, and creating a permanent key worker visa for scarce occupations such as construction and maintenance.
Tom Smith, director of economic policy at the Tony Blair Institute, added: “The Chancellor accepts he has tough choices to make. He cannot satisfy markets, party, business and voters all at once. The only way to do this over time is to get Britain back on the growth path, and that means a new bargain between government and business.”
“A credible budget not only raises taxes, it must also raise the eyebrows of Britain. The government needs to demonstrate fiscal discipline but also the confidence to support business.”
It comes as the CBI warned in a new report against “thousands of tax deaths” and said “every decision” the chancellor makes must help stimulate economic growth.
The organization, which represents thousands of businesses, said in its Budget presentation to the Treasury that “difficult choices must be made without leaving the door open to further undesirable tax changes in the spring.”
He added: “Dying by the thousands in taxes is not a credible way to create a thriving and prosperous economy.”
He said nothing should be considered “off the table”, including unpopular moves in areas such as personal tax, public spending, welfare provision and pension increases.
They also called on the government to ramp up critical infrastructure and use technology to modernize the economy.
Rain Newton-Smith, chief executive of the CBI, said: “Intervening annually to plug the ever-increasing fiscal deficit is not an appropriate approach to a problem of this magnitude.
“We need to make tough decisions now, otherwise we risk a downturn that will leave us robbing Peter and paying Paul to fund normal government spending, jeopardizing our growth prospects.
“Short-term thinking leads to long-term decline, let’s not make this a political choice we will regret.”
He added that strict adherence to the manifesto’s commitments “may be politically laudable, but is only economically feasible if material conditions remain unchanged.” The truth is that it is not. “Tax rises and spending cuts are unpopular, but the reality is that the chancellor has little choice.”
Reeves warned Tuesday that “each of us must do our part” and warned that “tough choices” lie ahead. He signaled he was prepared to break Labour’s flagship manifesto commitment not to increase income tax, personal national insurance or VAT.
Weekend, Independent It emerged that Ms Reeves would face a backlash from the cabinet if she did not keep her promise to voters.
The Treasury was contacted to get an opinion on the issue.
