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14h ago

Reeves Pressed to Plug £20bn–£30bn Budget Gap as NIESR Urges Income Tax Rise

A leading think tank says lifting income tax would harm the economy less than other ways to raise the needed revenue.

Britain's Chancellor of the Exchequer Rachel Reeves takes part in a conversation on Security Begins at Home with a Strong Economy at the 2025 Global Progress Action Summit, in London, Britain, September 26, 2025. REUTERS/Jack Taylor/File Photo
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Overview

  • Oxford Economics estimates the November statement will need £20bn–£30bn of tightening to meet fiscal rules.
  • The OBR has signalled a shortfall near £30bn and is set to lower growth forecasts after earlier overestimates.
  • Rising gilt yields are projected to add about £4bn to borrowing costs, while welfare reversals point to roughly £6bn in offsetting cuts.
  • Major bond investors including Pimco and BlackRock are urging a bigger Treasury buffer, which could raise the near-term target if headroom is increased from £9.9bn.
  • NIESR argues a roughly 1 percentage-point income tax rise would be less damaging than alternatives such as VAT, while options under discussion include extending income tax and NI threshold freezes worth about £10bn and targeted levies.