POLL: Should Reeves tax the rich to fill ‘black hole’? | Politics | News
The wealthy will be forced to “contribute more” ahead of the second Autumn Budget, Rachel Reeves has warned. Treasury sources said the Chancellor would not cut spending or significantly increase borrowing. But this leaves him with no choice but to raise taxes despite warnings of a £30bn shortfall in the public finances.
Close sources told The Telegraph Ms Reeves: “She will be fair in asking them to contribute more to rebuilding our public services.” A Treasury source added that it was prepared to take “difficult decisions” as the “stability” of public finances was at risk, but assured there would be no “return to austerity”.
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They emphasized that the economy was facing a “once-in-a-generation” problem and that “there is no quick fix.”
The Chancellor is determined to “maintain tight control over public spending and wage a war on waste” to keep inflation and interest rates low, the source added.
They said: “More debt will endanger our public finances, leaving future generations more indebted, while a return to austerity will condemn the country to decline.”
It follows reports that Ms Reeves is planning a £7bn tax raid on pensions to plug the Budget black hole.
Experts have warned that the Chancellor could increase taxes on both pension contributions paid by working people and retirees’ pension payments.
Economists at Oxford Economics said the Chancellor would have to find savings of up to £30bn, including £6bn from the Government’s cuts to benefits and winter fuel allowance.
Options include a £3bn increase by setting a uniform 30% tax relief rate for pension contributions; This means the Treasury seizes more cash from higher-rate taxpayers who are saving for retirement.
Ms Reeves could also apply National Insurance for the first time to the £50 billion employers contribute to staff pension schemes, which could raise £2 billion.
Another £2bn could come from reducing the lump sum people can take tax-free from their retirement savings to £100,000 from today’s £268,275.
