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Reeves could raise billions without breaking Labour pledges – IFS
Rachel Reeves could raise tens of billions from tax reforms without breaking Labour’s manifesto pledges but must avoid “half-baked fixes” to Britain’s economic woes at the Budget, leading economists have said.
The Government is under pressure to balance the books ahead of November’s autumn statement amid warnings of a black hole estimated to be as much as £50 billion in the public finances.
But in a wide-ranging report, the Institute for Fiscal Studies urged the Chancellor to resist “simply hiking rates” without making other changes to an “unfair” and “inefficient” tax system.
It also warned that restricting income tax relief on pension contributions “should be avoided” and repeated its cautions against an annual wealth tax, which it says would penalise savers, or increasing stamp duty.
Among the options available to the Chancellor as set out by the IFS are:
– Ending capital gains tax relief on death, which allows for assets to be inherited without paying CGT on the increase in value over the deceased person’s lifetime, to raise £2.3 billion in 2029-30.
– Impose a “one-off” tax on wealth, while avoiding what it described as “serious drawbacks” of a recurring wealth tax.
– Double council tax rates on the top two property bands to raise £4.4 billion. Any extra cash from changes to council tax would flow to local authorities rather than central government, but Ms Reeves could in turn reduce the grants paid to local authorities if she wanted to bolster the Treasury’s coffers, the IFS said.
– Reforming death duties to abolish the additional £175,000 tax-free allowance that can be used when passing on a primary residence to a direct descendant, raising around £6 billion.
– Increasing the bank levy and the bank surcharge, which taken together will already raise a total of £2.4 billion in 2025-26. A one percentage point increase in the bank surcharge would raise around £0.4 billion in 2029-30.
– Tackling non-compliance to narrow a widening corporation tax gap between the amount of tax the Government thinks should be paid and how much it actually collects.
“It would be possible for the Chancellor to raise tens of billions of pounds a year more in revenue without breaking the letter of Labour’s manifesto promise not to increase the ‘big three’ taxes.
“But doing so would not be straightforward,” the IFS said.
On the other hand, extending the freeze on personal tax thresholds including national insurance contributions (NICs) further would be expected to raise around £10.4 billion a year from 2029-30.
But this would amount to a breach of Labour’s manifesto pledge not to increase taxes for “working people” which includes income tax, national insurance and VAT, the IFS said.
The think tank also called for a wider overhaul of the council tax system, arguing that banding is still based on the value of properties as of 1991 and must be updated to end a “regressive” and “hard to justify” rate structure.
It said a “good end goal” would be to replace stamp duty on housing and council tax with a “new recurrent property tax” proportionate to updated values.
“Changing rates and thresholds is all very well, but unless the Chancellor is willing to pursue genuine reform it will be taxpayers that shoulder the cost of her neglect,” the report, which forms a chapter in the IFS’ wider budget assessment for 2025, says.
Economists have warned Ms Reeves is set for a £41 billion shortfall on her self-imposed rule of balancing day-to-day spending with tax receipts in 2029-30 ahead of her Budget next month.
Isaac Delestre, a senior research economist at the think tank and an author of the chapter, said Ms Reeves would have “fallen short” if she limits her ambition to a dash for revenue without wider reform.
“Almost any package of tax rises is likely to weigh on growth, but by tackling some of the inefficiency and unfairness in our existing tax system, the Chancellor could limit the economic damage,” he said.
“The last thing we need in November is directionless tinkering and half-baked fixes. There is an opportunity here.
“The Chancellor should use this Budget to take real steps down the road towards a more rational tax system that is better geared to promoting the prosperity and well-being of taxpayers.”
The firm was unable to cope during high demand, Ofwat says, leading to “immense stress” for customers.
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Middle East heat may ripple across India’s energy supply chain, flags Goldman Sachs – The Times of India
As tensions continue to heat up in the Middle East, concerns are raising about disruptions to one of the world’s most critical energy shipping routes, the Strait of Hormuz. Any disruption could significantly affect major oil-importing countries such as India, as the narrow Strait of Hormuz is central to global energy trade. The strait sees almost 20 million barrels of oil passing through each day, or about a fifth of the world’s consumption, pass through the route. The waterway also carries roughly 19% of global liquefied natural gas (LNG) shipments, making it a crucial corridor for energy-importing economies.A recent report by Goldman Sachs has flagged early signs of stress in the region. The report warned that tanker traffic through the Strait of Hormuz has already begun showing signs of disruption, with shipping firms, oil producers and insurers adopting a cautious approach following reports of damaged vessels in nearby waters.According to the firm, financial markets have already begun factoring in the geopolitical risk. Oil prices currently carry an estimated risk premium of $18-per-barrel, reflecting the potential market impact if energy flows through the Strait of Hormuz were disrupted for about a month.
Even is the oil facilities are not directly damaged, a shutdown of the shipping route could expose a significant portion of global supply. The report estimates that in an event of full closure, about 16 million barrels per day of oil flows could be affected, despite the availability of some pipeline routes designed to bypass the strait.And the risks are not limited to crude oil shipments with almost 80 million tonnes of LNG exports annually, much of it from Qatar, moving through the passage. Any prolonged disruption could tighten gas supply globally and potentially drive European benchmark gas prices back to levels seen during the 2022 energy crisis.
Asian economies stand among the most exposed to such disruptions. Major importers such as China, India, Japan and South Korea depend heavily on oil and LNG shipments that transit through the strategic corridor.While global oil inventories and spare production capacity could help cushion short-term shocks, the report warned that sustained disruption to Gulf shipping routes could trigger sharp volatility in global energy markets and push prices higher across oil, gas and refined fuel products.Market participants and governments are closely watching tanker traffic in the Strait of Hormuz, along with diplomatic and military developments involving the United States, Iran and Gulf nations, to assess whether the current disruptions remain temporary or escalate into a broader energy supply shock.
KARACHI: The Pakistan Stock Exchange rallied on Thursday after Saudi Arabia assured Pakistan of facilitating crude oil shipments through the Red Sea port of Yanbu Port, easing concerns over potential fuel supply disruptions.
The benchmark KSE-100 Index climbed sharply during the trading session, rising 4,439.93 points (2.85%) to reach an intraday high of 160,217.14 points.
Market Recovery
Analysts attributed the market rebound to renewed institutional buying and improving investor sentiment after Saudi assurances on oil supplies.
Market expert Ahsan Mehanti, CEO of Arif Habib Commodities, said easing fuel supply concerns played a key role in the recovery.
He added that rising global crude prices, expectations of a new International Monetary Fund loan tranche for Pakistan, and positive economic indicators also boosted investor confidence.
Alternative Oil Route
Pakistan sought an alternative supply route after Iran announced the closure of the Strait of Hormuz, a crucial global oil transit corridor.
Federal Petroleum Minister Ali Pervaiz Malik held talks with Nawaf bin Said Al-Malki, requesting Saudi support for uninterrupted energy supplies.
Saudi authorities reportedly assured Pakistan that oil shipments could be routed through Yanbu, and one crude vessel has already been prepared for dispatch.
Global Oil Market Impact
Oil prices continued to rise amid tensions in the Middle East conflict involving Iran, Israel and the United States.
Brent crude: up 3.26% to $83.99 per barrel
West Texas Intermediate (WTI): up 3.70% to $77.42 per barrel
Energy markets remain volatile as shipping disruptions threaten supply through the Strait of Hormuz, a route that handles nearly 20% of global oil trade.
Analysts say the Saudi assurance helped calm fears about Pakistan’s energy supply chain, contributing to the strong recovery at the PSX.
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