Rachel Reeves is under mounting pressure from senior policymakers and economists to target wealthier pensioners and homeowners with new taxes as she seeks to stabilise the public finances ahead of November’s Budget.
In a letter to the Chancellor, signatories including Lord Gus O’Donnell, the former cabinet secretary, and Lord Jim O’Neill, the former Treasury minister, argued that the government should reform property and wealth taxes to ensure “better-off older people” make a greater contribution to funding health, social care and pensions.
The letter, also signed by high-profile economists Mariana Mazzucato, Mohamed El-Erian, Sir Anton Muscatelli, Simon Wren-Lewis and Jonathan Portes, warned that the UK’s fiscal position is “not sustainable” without structural changes to the tax base.
The Chancellor is facing a deficit of between £20bn and £30bn against her main fiscal rule, which requires day-to-day spending to be funded by tax revenues rather than borrowing. Some estimates suggest the shortfall could reach £40bn once weaker growth and productivity forecasts from the Office for Budget Responsibility are factored in.
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