Proactive Investors - Chancellor Rachel Reeves is preparing to raise taxes and cut spending by £40 billion in the upcoming Budget to plug a reported £22 billion shortfall in public finances, according to a BBC report.
She told ministers that the £22 billion shortfall left by the previous government would only maintain current services.
Although Reeves has pledged no return to austerity measures, she is expected to make difficult decisions on welfare, taxes, and spending in the 30 October Budget announcement.
Paul Johnson from the Institute for Fiscal Studies told BBC Radio that "if they are looking for £20bn or £30bn of tax rises, in the end they will have no choice but to do something with income tax”.
That prediction contradicts Labour’s pledge to leave income tax, national insurance, VAT and corporation tax unchanged.
Treasury officials are also reportedly looking into introducing National Insurance on employer pension contributions to help raise national revenue.
Business groups have expressed concerns about the potential tax hikes, warning they could harm economic growth and sectors like hospitality.
Reeves is reportedly considering raising the rate of capital gains tax to between 33% and 39%.
Currently, the tax sits at 24% on gains from residential property, 18% to 28% for interest on investments and 20% for other assets.
Budget fears escalate
Budget fears have led to a sharp fall in investor confidence, according to a new Hargreaves Lansdown (LON:HRGV) poll.
Victoria Hasler, head of fund research at Hargreaves Lansdown, said: “Investor confidence fell 11% in October, and confidence in UK economic growth tumbled by almost 20%.
“The looming budget in the UK, due to be delivered just one day before Halloween, seems to have spooked investors, with many worrying about cuts to the capital gains tax (CGT) allowance, rises in the CGT rates and potential pension reforms.
“Overall, with the likelihood of many treats coming from this Budget being low, it feels like it could be a pretty scary time for UK investors.”