Prime Minister Keir Starmer has stopped short of guaranteeing that taxes won't increase in the upcoming autumn Budget, following analysis from a leading economic think tank about a substantial gap in government finances.
When pressed by media representatives about potential changes to VAT, income tax or corporation tax, the Labour Party leader avoided giving direct assurances.
His reticence follows a report from the National Institute of Economic and Social Research (NIESR) indicating that the UK's fiscal position has deteriorated by approximately £50billion.
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The research organisation has calculated that budgetary measures worth £51.1billion would be required for Chancellor Rachel Reeves to achieve her financial objectives.
The Prime Minister has stopped short of refusing to rule out a tax raid
|GETTY / PA
The institute's assessment reveals that the Chancellor is projected to overshoot her borrowing limits by £41billion.
According to their calculations, this shortfall necessitates fiscal adjustments through either revenue increases or expenditure reductions totalling £51.1billion to preserve the £9.9billion buffer that has been in place since the previous Budget.
The think tank attributes this financial deterioration to multiple factors, including decelerating economic expansion, weakness in employment conditions, and the financial impact of Labour's policy reversals regarding welfare expenditure.
These elements have collectively pushed the nation's fiscal position further into deficit, creating significant challenges for the Treasury's budget planning.
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Households could be hit with a tax raid in the upcoming Budget | PADuring his appearance in Milton Keynes, the Prime Minister stated: "In the autumn, we'll get the full forecast and obviously set out our Budget."
He emphasised that his administration would prioritise living standards, saying: "The focus will be living standards, so that we will build on what we've done in the first year of this Government."
Starmer highlighted recent economic achievements, noting: "We've stabilised the economy. That means interest rates have been cut now four times. For anybody watching this on a mortgage, that makes a huge difference on a monthly basis to how much they pay."
When challenged about economists' predictions regarding necessary tax increases, he responded: "Some of the figures that are being put out are not figures that I recognise."
Concerningly, the NIESR think tank carries significant weight in economic circles, having been established as Britain's first independent economic think tank with John Maynard Keynes among its founders.
The organisation's economic modelling is utilised by institutions including the Treasury and the International Monetary Fund, whilst its president, Sir Paul Tucker, previously served as deputy governor at the Bank of England.
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The Chancellor is under pressure over her fiscal decisions
| GETTYDavid Aikman, who leads the institute, has indicated that avoiding tax increases affecting ordinary workers would prove challenging for Reeves whilst attempting to adhere to fiscal regulations and honour expenditure commitments.
According to NIESR economists, lving standards to grow modestly in 2025-26 for middle- and high-income households.
However, the think tank warned there is likely to be a decline in living standards for the poorest 10 per cent. For these households, higher-thaninflation increases in housing and food costs are likely to outstrip income growth.