Rachel Reeves has been urged by an influential Labour-linked think tank to move the tax burden away from young, working Britons and towards pensioners.
The Resolution Foundation has suggested Ms Reeves should hike income tax by two per cent - while slashing the National Insurance rate by the same amount.
The move could raise £6billion for the Government as income tax is also paid by pensioners and self-employed Britons, while workers on a salary would see the hike cancelled out by the NI drop.
The think tank pushing for the plans harbours strong ties with senior figures within the Government.
The Resolution Foundation has suggested Ms Reeves should hike income tax by two pence in the pound
|GETTY
Treasury Minister Torsten Bell is the former chief executive of the Resolution Foundation - and has been tasked with helping Ms Reeves patch an alleged "black hole" in Britain's public finances ahead of the Autumn Budget.
The think tank has suggested various proposals to aid Ms Reeves' money-raising mission, including levies on small businesses and a sugar tax hike.
Its principal economist, Adam Corlett, said: “Any tax rises are likely to be painful but given the fallout from the recent employer NI rise, the Chancellor should do all she can to avoid loading further pain onto workers’ pay packets.
“She can do this by switching our tax base away from employee National Insurance and onto income tax, which is paid by a far broader group in society.
Treasury minister Torsten Bell (pictured right with Scottish First Minister John Swinney) is the former chief executive of the Resolution Foundation
|GETTY
"This should form part of wider efforts to level the playing field on tax, such as ensuring that lawyers and landlords face the same tax rates as their clients and tenants.
“These sensible reforms would raise revenue while doing the least possible harm to workers and the wider economy.
"And by acting decisively, the Chancellor can turn her attention... on to securing stronger economic growth.”
The economic think tank also urged Ms Reeves to “promote fair competition” by cracking down on small businesses who avoid paying corporation tax.
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The avoidance is estimated to cost the Treasury around £15billion every year.
Ms Reeves has also been urged to reduce the £90,000 VAT threshold as it hinders small businesses wishing to expand, according to the Resolution Foundation.
It was also suggested that the Government should slap a carbon charge to long-haul shipping and flights alongside making changes to vehicle excise duty to raise roughly £4billion every year.
Just days ago, financial experts warned older Britons not to make rash decisions about their retirement funds because of "fear and rumour".
In 2024/25, pension savers withdrew more than £70billion from their pots according to data from the Financial Conduct Authority.
The figure shows an increase of almost 36 per cent on the previous year, which saw pensioners take out £52billion..
Eamonn Prendergast, a financial planning adviser at Palantir, warned that pension pots are designed to "last decades, not be raided in panic."
Mr Prendergast added: "The Government must do more to quash rumours early and give clarity.”
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