Second think tank urges Reeves to break manifesto vows and raise taxes this autumn

A second think tank urged Chancellor Rachel Reeves to break Labour’s manifesto pledge and raise VAT, income tax or national insurance this autumn, arguing that broad-based tax rises are the most reliable way to generate substantial revenue.

In a report published today, the Institute for Government said raising substantial revenue will likely require broad-based tax rises paid by a large population, and that the best candidates would be increases to the main rates of VAT, income tax and national insurance—even if that has to come at the political price of undoing one of Labour’s manifesto commitments. "Raising substantial revenue will likely require broad-based tax rises that are paid by a large population," the institute said, adding that "The best candidates would be increases to the main rates of VAT, income tax and national insurance – even if that has to come at the political price of undoing one of Labour’s manifesto commitments."

The report also warned that a wealth tax would be difficult and risky to raise substantial sums, noting that revenue would be more uncertain because it would be sensitive to the behaviour of a small group of people. The authors said the revenue yield from such measures would be uncertain and therefore less reliable than broad-based changes.

Days earlier, the Resolution Foundation urged Reeves to cut national insurance and increase income tax to create a level playing field and protect workers’ pay. It proposed a 2p cut in national insurance paired with a 2p rise in income tax, arguing the move could raise about £6 billion and help tackle perceived unfairness since income tax is paid by more people, including pensioners and landlords.

The Government has repeatedly said it will not increase the rates of VAT, income tax or national insurance at the Budget in November. Tom Pope, the IfG’s deputy chief economist, said: “This autumn, the chancellor finds herself in a difficult position. With tax rises all but inevitable, she should reject the path of least resistance, often taken by her predecessors, of raising taxes in an inconsistent way based on what seems easiest. Instead, now is the time to commit to tax reform and lay out an agenda on tax that fits with her broader growth objectives.”

The report reflects the ongoing debate about how best to balance revenue needs with growth priorities and the political realities of implementing large-scale tax reform.