Business
Rachel Reeves should avoid ‘half-baked’ tax fixes in Budget, says IFS
Chancellor Rachel Reeves should avoid “directionless tinkering and half-baked fixes” when trying to boost the government’s tax take in next month’s Budget, a leading think tank has said.
Taxes are widely expected to go up in the Budget, with pressure on the chancellor to raise money in order to meet her self-imposed rules for government finances.
However, the Institute for Fiscal Studies (IFS) – regarded as one of the UK’s most influential economic voices – has said some tax rises could be “especially economically harmful”.
The Treasury said the chancellor had been clear the Budget would strike the right balance between funding public services, while also encouraging growth and investment.
Some analysts have estimated that Reeves will have to raise tens of billions of pounds through either increasing taxes or cutting spending in order to meet her rules which she has described as “non-negotiable”.
The two main rules are:
- Not to borrow to fund day-to-day public spending by the end of this parliament
- To get government debt falling as a share of national income by the end of this parliament
Before the 2024 general election, Labour promised not to increase income tax, National Insurance or VAT for working people.
The IFS said it would be possible for the chancellor to raise tens of billions of pounds a year more in revenue without breaking these manifesto promises, but this would not be straightforward.
Its director Helen Miller told BBC’s Radio 4’s Today programme: “The politics is important and we’re going to hear lots and lots about whether Rachel Reeves can raise the money she wants without breaking one of her manifesto pledges – and that’s worth thinking about – but the economics is important too.”
The IFS said there are “serious constraints” on the next four biggest taxes – corporation tax, council tax, business rates and fuel duties – while “some other tax-raising options would be especially economically harmful”.
The IFS’s comments came in an extract from its annual Green Budget, which analyses the challenges facing the chancellor.
In it, the think tank urged wider reform to the tax system which would align “overall tax rates across different forms of income”, something it says would be “fairer and more growth friendly”.
“There is an opportunity to be bold and take steps towards a system that does less to impede growth and works better for us all,” said Ms Miller who is one of the authors of the report.
It suggests reforms to property tax and capital gains tax as “good places to start”.
Speaking to the Today programme Ms Miller said that stamp duty is an “absolutely awful tax” and said council tax, which is based on 1991 property valuations, is “ludicrously out of date” and “regressive”.
“Make it a tax based on up-to-date property values, make it proportional, and raise revenue from that rather than the current council tax and stamp duty,” she added.
The report goes on to look at a number of trade-offs the government could make in an effort to bring in more income.
It warns against a wealth tax – which it said would face “huge practical challenges”, potentially penalising savings and encouraging wealthier people to leave the country.
“If the chancellor wants to raise more from the better-off, a better approach would be to fix existing wealth-related taxes, including capital gains tax,” it noted.
It says property taxation is “an area in desperate need of reform”. It calls for a reformed council tax based on current property values, rather than the current system that “ludicrously” uses values from 1991.
Extending the current freeze on income tax thresholds, which is due to end in 2028, could raise “a significant amount”. Speaking to the BBC in September, Rachel Reeves did not rule this out.
The IFS noted that restricting income tax relief for pension contributions could potentially raise a large sum – but should be avoided as it would be “unfair and distortionary”.
It said there were “better options” for increasing tax on pensions, such as reforming the tax-free element.
A Treasury spokesperson said: “The chancellor has been clear that at Budget she will strike the right balance between making sure that we have enough money to fund our public services, whilst also ensuring that we can bring growth and investment to businesses.”
Business
Budget 2026 Should Support MSMEs, Critical Minerals For Boosting Trade Resilience: Deloitte
Last Updated:
Deloitte India urges FY27 Budget to boost MSME support and critical mineral security, job protection and advancing India’s global manufacturing and clean energy goals.
Budget 2026 Expectations.
Budget 2026: Deloitte India has pitched a sharper focus on MSME support and critical mineral security in the FY27 Union Budget, arguing that these measures are essential to strengthen India’s trade resilience and reduce external vulnerabilities amid rising global uncertainty.
In its Budget expectations note, Deloitte India said micro, small and medium enterprises play a pivotal role in the economy, accounting for nearly 46% of India’s exports and emerging as the second-largest employer after agriculture. According to the firm, easing financial and compliance-related pressures on MSMEs would help them cope with global volatility, sustain production and remain competitive in overseas markets.
The Union Budget 2026-27 will be tabled on Sunday, February 1.
“Strengthening MSMEs will safeguard jobs and drive inclusive economic growth, boost rural incomes and support India’s ambition to become a global manufacturing hub,” Deloitte said.
The firm recommended measures such as enhanced export credit availability, concessional financing and simplified digital compliance systems to reduce the regulatory burden on small businesses. It also called for comprehensive training programmes to improve last-mile competitiveness of MSMEs, particularly those linked to global value chains.
Deloitte further suggested targeted export incentives or enhanced duty drawback support for tariff-sensitive sectors such as ready-made garments, gems and jewellery, and leather, which are more vulnerable to global trade disruptions.
Highlighting the risks from an increasingly protectionist global environment, Deloitte Economist Rumki Majumdar said rising uncertainty from tariff hikes, changes in rules of origin and non-tariff barriers could disproportionately affect Indian exporters. While the direct impact of global trade frictions on GDP growth may be limited to 40-80 basis points, the spillover effects on MSMEs and employment could be far more severe.
“MSMEs contribute 30.1 per cent to GDP, account for 45.79 per cent of India’s exports and employ nearly 290 million people; disruptions in export markets or tightening trade rules pose serious risks to jobs and income stability,” Majumdar said.
Beyond MSMEs, Deloitte emphasised the need for a strategic push on critical minerals to secure supply chains and support India’s clean energy transition. It proposed setting up a dedicated critical minerals fund to finance overseas acquisitions and technology partnerships, ensuring long-term access to essential resources.
The firm also recommended deeper global collaboration with regions such as Africa, Australia and Latin America to secure upstream access to minerals, alongside joint research and development in mineral processing and recycling. In addition, it called for incentives to promote investments in renewable energy, green hydrogen and grid-scale energy storage.
Deloitte said expanded funding for exploration, extraction and processing of key critical minerals, including lithium, cobalt and rare earth magnets, would be crucial to reduce import dependence and strengthen India’s strategic and economic security in the years ahead.
Click here to add News18 as your preferred news source on Google.
January 16, 2026, 15:02 IST
Read More
Pakistan Stock Exchange (PSX) on Friday staged a strong comeback, breaking the long bearish momentum as snowballing forex reserves have lifted investor sentiment.
During intraday trading, the PSX’s benchmark KSE-100 index gained a whopping 3,146.23 points to climb to 184,602.56 points, marking a positive change of 1.70%.
Out of 562 active companies, share prices of 375 advanced and of 67 declined while rates of 120 companies remained unchanged.
Economic analysts said the uptick offered some breathing space for the economy, even as the country continued to keep a close watch on external inflows and outflows.
Pakistan’s foreign exchange reserves inched up by $16 million over the past week, according to figures released by the State Bank of Pakistan.
The central bank said its official reserves rose from $16.0557 billion to $16.0718 billion, showing a modest gain during the week.
Overall, the country’s total reserves climbed to $21.2484 billion.
The State Bank also noted that commercial banks’ holdings went up by $5.6 million, reaching $5.1927 billion.
The central bank projects the FY26 current account deficit at 0–1% of GDP and sees reserves at $17.8 billion by June 2026 with planned official inflows.
A day earlier, the stock exchange dropped by over 1,100 points due to massive selling pressure.
The PSX had extended losses after recording an increase for a brief period as investors seemed cautious amid rising geopolitical tensions involving Iran.
During intraday trading, the KSE-100 index touched 183,717.53 due to strong buying in the early sessions before it turned bearish by losing 69.29 points to close at 182,500.52 points.
International officials have warned that US military intervention in Iran now appears likely and could take place within the next 24 hours amid sharply escalating tensions in the Middle East.
American, European and Israeli sources said preparations for possible action were under way as Washington began evacuating personnel from its major air base in Qatar.
NEW DELHI: People with job cards assigned under Mahatma Gandhi National Rural Guarantee Scheme will be able to get work without disruption when transition takes place to new rural employment framework under Viksit Bharat-Guarantee for Rozgar and Aajeevika Mission (Gramin) Act.Even though exact timeframe is not known yet, rural development ministry officials said the VB-G RAM G scheme will come into force in the coming financial year after the Centre frames and notifies the rules. After govt notifies the Act’s commencement date, states will get six months to make their schemes to enable implementation of the law.To ensure there is no disruption and job guarantee is upheld during transition from MGNREGA, it has been proposed to enable workers to use the same job cards issued under MGNREGA with Aadhaar-based eKYC.The officials said that as of now, around 75% of job cards have been verified with eKYC under the ongoing scheme. Moreover, ongoing projects under MGNREGA, if incomplete when the transition happens to the new scheme, would stay on course.Meanwhile, work is on to frame rules, lay out regulations on normative allocations, fund flow plan, IT framework, a national-level steering panel and social audits.Under the new law, focus will be on transparency to weed out leakages and duplicacy of work,the social audit system will be strengthened, and technology leveraged to create systems to establish work progress, timely wage payment and accountability through ‘e-measurement’ books, sources said. Demand for work will have to be entered on a digital platform. Officials made it clear the new law in no way interferes with demand-driven character of the scheme.
Budget 2026 Should Support MSMEs, Critical Minerals For Boosting Trade Resilience: Deloitte
Australia’s apparel imports fall, textiles rise in July-Nov 2025
Robert Downey Jr. hails Timothée Chalamet as ‘one of the greats’
-
Politics1 week agoUK says provided assistance in US-led tanker seizure
-
Entertainment1 week agoDoes new US food pyramid put too much steak on your plate?
-
Entertainment1 week agoWhy did Nick Reiner’s lawyer Alan Jackson withdraw from case?
-
Sports5 days agoClock is ticking for Frank at Spurs, with dwindling evidence he deserves extra time
-
Business1 week agoTrump moves to ban home purchases by institutional investors
-
Sports1 week agoPGA of America CEO steps down after one year to take care of mother and mother-in-law
-
Tech3 days agoNew Proposed Legislation Would Let Self-Driving Cars Operate in New York State
-
Business1 week agoBulls dominate as KSE-100 breaks past 186,000 mark – SUCH TV