Resolution Foundation urges £30 billion tax raid, 2p income tax rise among proposals

Britain’s Resolution Foundation has published a report urging a package of tax increases totaling about £30 billion, including a 2p rise in the basic rate of income tax and new levies on items from salt and sugar to long-haul flights and pensions. The document argues that, given the scale of the fiscal gap, tax measures must play a central role in balancing the books even as the government -- led by Labour’s potential chancellor candidate Rachel Reeves -- faces pressure to keep debt and borrowing on a downward track amid jitters in bond markets.

The plan makes clear the Foundation’s view that spending cuts alone are unlikely to close a large Budget hole. It says, in effect, that “So tax must play a role (and anyone who claims otherwise should tell us how else they might save such a sum).” Among the concrete measures is a 2p increase in the rate of income tax and a salt-and-sugar tax that the Foundation estimates could raise about £3.5 billion, with inflation likely to bear the brunt of any rises in food prices.

The proposals drew swift rebukes from the business world.

Tory business spokesman Andrew Griffith said the plan threatened “to tax the economy into recession.” He added: “Rather than roll the pitch for the Chancellor to break her promise not to hike income tax, Labour’s house elves at the Resolution Foundation should apply themselves to advocating cuts to government spending – starting with the bloated welfare bill.”

Shadow chancellor Sir Mel Stride described the proposals as “a worrying sign of what Labour ministers may be planning for the Budget. Having already raised taxes by £40 billion a year, Reeves will only hurt hard-working families and stifle growth if she comes back for more – something she said she wouldn’t do.”

Business groups warned against further tax hikes that could add to the pain after last autumn’s Budget raid. The British Retail Consortium’s Helen Dickinson said firms were “still reeling” from higher costs, adding: “It is vital the next Budget does not add further costs on retailers which would only push inflation up faster.” Anna Leach of the Institute of Directors said that, while some tax increases may be needed, the Budget should be “as tax-light as possible to avoid undermining growth.”

The debate comes as Reeves faces pressure to meet rules aimed at reducing debt and borrowing, with bond-market jitters underscoring the political difficulty of any new tax measures. The Resolution Foundation’s report downplays the likelihood of spending cuts as a primary remedy for a large hole in the Budget, arguing instead that tax measures must contribute to savings.

Ros Altmann, a former pensions minister, said the recommendations were “very worrying” and noted concern that many of those advising on Budget tax measures “hail from the Resolution Foundation.” Other business voices have warned that the economy could slow if higher taxes squeeze consumer demand and corporate investment. Lord Simon Wolfson has warned Britain faces years of “anaemic growth,” while Stuart Rose has cautioned that Labour’s policies could push the economy to the “edge of a crisis.” Allan Leighton urged the Chancellor to stop “taxing everything.”

As the Budget season advances, Reeves and her team must weigh political constraints, the signals sent by markets, and the practical impact on households and firms. The Resolution Foundation’s report provides a roadmap for tax-based savings, but it remains to be seen whether and how much of its package could be embraced in policy. Officials in Westminster say the debate over tax versus spending will shape the broader strategy for stabilizing debt while sustaining growth, with a Budget expected later this year to outline the balance between revenue-raising measures and measures to bolster the economy.