Resolution Foundation urges £30bn tax raid, including income tax rise, as businesses warn of more pain

Britain's Resolution Foundation has urged a £30 billion fiscal raid on households and businesses, arguing that tax rises are necessary to close a looming budget hole. The plan, outlined in a new report, calls for a 2p increase in income tax and a bundle of levies on everything from salt and sugar to long-haul flights and pensions. It also suggests that there may be room for spending cuts, but notes that tax must play a role if the gap is to be closed.

The proposal estimates a £3.5 billion raise from a salt and sugar tax and acknowledges that the measures could feed into consumer prices. It specifies that salt and vinegar crisps could rise about 2% and Dairy Milk chocolate around 13%, illustrating the potential inflationary impact of broad levies. The foundation also argues that, while spending cuts could contribute, they are unlikely to fill the hole alone and that tax policy must bear a substantial share of the burden.

Reaction from policymakers and business groups was swift and varied. Labour’s position was tested as the report’s recommendations straddle a line between fiscal realism and political commitments. Shadow chancellor Sir Mel Stride described the proposals as a worrying sign of what Labour ministers might plan for the Budget, noting that Reeves has already raised taxes significantly and warn of consequences if she returns for more. He urged caution about revisiting Labour’s manifesto pledges. The Tory business spokesman, Andrew Griffith, argued that the ideas risk “taxing the economy into recession” and called on supporters of a tax-backed Budget to pursue spending reductions instead.

Business groups sounded a pronounced caution. The British Retail Consortium’s Helen Dickinson said firms were still “reeling” from higher costs imposed in the last Budget and warned that further taxes could push inflation higher. Anna Leach, chief economist at the Institute of Directors, said that while some tax increases might be necessary, the Budget should be “as tax-light as possible” to avoid undermining growth. Ros Altmann, a former pensions minister, called the proposals “very worrying,” noting concerns about potential conflicts of interest given the Foundation’s advisers. In recent weeks, business leaders have warned that tax rises could dampen growth, with Lord Wolfson and Stuart Rose flagging risks to the economy. Allan Leighton joined calls to avoid broad tax hikes, urging the Chancellor to resist measures that would slow momentum.

The Foundation’s report also sought to downplay the likelihood that spending cuts alone could fill a Budget black hole. It stated that “so tax must play a role (and anyone who claims otherwise should tell us how else they might save such a sum).” The authors argued that a combination of targeted spending restraint and revenue-raising measures would be necessary to meet debt targets while sustaining growth.

The proposals come amid pressure on Chancellor Rachel Reeves to meet debt and borrowing targets, with traders and bond markets watching Britain’s finances closely. Proponents argue that without credible consolidation, near-term financing risks could intensify, potentially widening gilt yields and increasing borrowing costs. The Resolution Foundation’s influence has grown in recent months, and its former head, Torsten Bell, has been cited as playing a key role in Budget discussions, a factor that has intensified scrutiny of the group’s recommendations.

Britain’s business landscape has grown wary of further tax increases after the last autumn’s package, which raised about £40 billion in annual tax take. Several executives have warned that another wave of levies could push retailers and manufacturers toward higher input costs and price pressures. The Foundation’s stance—advocating taxes as a primary tool to close the fiscal gap—highlights the ongoing tension between fiscal consolidation and growth, a dilemma that will shape the direction of the next Budget.

Looking ahead, Reeves faces a challenging balancing act as she navigates debt targets and market jitters while attempting to safeguard growth. The debate surrounding the Foundation’s plan underscores the broader question: how to achieve fiscal credibility without stifling a still-fragile recovery. As discussions move from think-tank briefs to parliamentary positioning, the markets will continue to scrutinize the credibility and potential impact of any proposed tax measures.

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