Business
Reeves urged to make Budget ‘bold’ or risk future tax rises
The chancellor should be “bold” in next month’s Budget or risk future spending cuts and tax rises, an influential think tank has said.
The Institute for Fiscal Studies (IFS) is projecting Rachel Reeves will need to find £22bn to make up a shortfall in the government’s finances, and will “almost certainly” have to raise taxes.
Finding this amount would allow the government to maintain the £10bn of headroom it has built into the system – but the IFS says there is a “strong case” for trying to increase it beyond this amount.
IFS director Helen Miller said the lack of a bigger buffer brought with it instability, and could leave the chancellor “limping from one forecast to the next”.
“A key challenge is ensuring that fiscal groundhog day doesn’t become a twice-yearly ritual,” Ms Miller said.
She said the position the chancellor finds herself in was “to a large extent, a situation of her own making”.
“When choosing to operate her fiscal rules with such teeny tiny headroom, Ms Reeves would have known that run-of-the-mill forecast changes could easily blow her off course,” Ms Miller added.
The think tank pointed to rising borrowing costs, weaker growth forecasts and spending commitments made since the spring as reasons for the government’s tight position.
It said Reeves needs to make up that shortfall so she can meet her own fiscal rules, which she has called “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
Ms Miller added that the “constant obsession with the headroom” was a distraction from important debates on how policy could bolster economic growth and the reform of the tax system.
Speaking on Wednesday, Reeves gave the strongest indication to date that she is planning to raise taxes in the Budget.
The IFS’s green budget looks ahead to some of the decisions the government will have to make in its 26 November Budget. The report is funded by the Nuffield Foundation and produced in association with Barclays.
In a chapter of its report published last week, the IFS urged said Reeves could raise tens of billions of pounds a year more in revenue without breaking manifesto promises, but this would not be straightforward.
During last year’s election, Labour said they “will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT” – which the IFS flags as the simplest ways to raise revenue.
The Oil and Gas Regulatory Authority (OGRA) has approved a fresh increase in the price of liquefied petroleum gas (LPG), raising the cost for both domestic consumers and commercial users.
According to the notification issued, the LPG price has been increased by Rs7.39 per kilogram, setting the new rate at Rs209 per kg for December. As a result, the price of a domestic LPG cylinder has risen by Rs87.21, bringing the new price to Rs2,466.10.
In November, the price of LPG stood at Rs201 per kg, while the domestic cylinder was priced at Rs2,378.89.
The latest price hike is expected to put additional pressure on households already grappling with rising living costs nationwide.
New Delhi: The taxable value of all supplies under GST surged by a robust 15 per cent during September-October this year, compared to the same period in 2024 due to sharp increase in consumption triggered by the tax rate cuts on goods across sectors that kicked in from September 22, according to official sources.
The growth in the same two-month period last year was 8.6 per cent. “This surge in taxable value during ‘Bachat Utsav’ demonstrates strong consumption uplift, stimulated by reduced rates and improved compliance behaviour,” a senior official said.
He pointed out that the growth has especially been strong in sectors where rate rationalisation was implemented, such as FMCG, pharma goods, food products, automobiles, medical devices and textiles. In these sectors, the taxable value of supplies has seen significantly higher growth, confirming that lower GST rates translated directly into higher consumer spending.
“It vindicates our strategy that reducing rates on essentials and mass-use sectors would create demand-side buoyancy — a Laffer Curve–type demand uplift,” he explained.These trends confirm that GST next-gen reforms have not disrupted revenue stability, and that consumption-side buoyancy has begun to translate into higher taxable value in key sectors.
This growth is in value terms which means that since GST rates were lower, the growth in volume terms will be even higher. It is clearly visible that while the Next Gen Reforms resulted in significant Bachat — increased consumption, industry has been very proactive in passing on the GST savings to the final consumers and ensuring that there is no supply side deficiency.
As GDP private consumption data will be released much later, GST taxable value serves as the most reliable real-time proxy for consumption, and the current numbers clearly indicate sustained demand expansion, the official added.
Business
Private sector data: Over 2 lakh private companies closed in 5 years; govt flags monitoring for suspicious cases – The Times of India
NEW DELHI: The government on Monday said that over the past five years, more than two lakh private companies have been closed in India.According to data provided by Minister of State for Corporate Affairs Harsh Malhotra in a written reply to the Lok Sabha, a total of 2,04,268 private companies were shut down between 2020-21 and 2024-25 due to amalgamation, conversion, dissolution or being struck off from official records under the Companies Act, 2013.Regarding the rehabilitation of employees from these closed companies, the minister said there is currently no proposal before the government, as reported by PTI. In the same period, 1,85,350 companies were officially removed from government records, including 8,648 entities struck off till July 16 this fiscal year. Companies can be removed from records if they are inactive for long periods or voluntarily after fulfilling regulatory requirements.On queries about shell companies and their potential use in money laundering, Malhotra highlighted that the term “shell company” is not defined under the Companies Act, 2013. However, he added that whenever suspicious instances are reported, they are shared with other government agencies such as the Enforcement Directorate and the Income Tax Department for monitoring.A major push to remove inactive companies took place in 2022-23, when 82,125 companies were struck off during a strike-off drive by the corporate affairs ministry.The minister also highlighted the government’s broader policy to simplify and rationalize the tax system. “It is the stated policy of the government to gradually phase out exemptions and deductions while rationalising tax rates to create a simple, transparent, and equitable tax regime,” he said. He added that several reforms have been undertaken to promote investment and ease of doing business, including substantial reductions in corporate tax rates for existing and new domestic companies.
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