British workers could face another £10bn stealth tax raid to shore up the public finances and pay for more defence spending, a top economist has warned, as Europe risks losing American military backing.
That suggests extending the Conservatives’ freeze on income tax thresholds which has forced more workers into paying income tax, and into higher tax brackets, even if their earnings have not kept up with inflation.
“This would give the Chancellor something like £8bn to £10bn per year in tax revenues, rebuilding the Treasury’s buffer against its fiscal rules whilst also addressing its defence spending ambitions.”.
“It’s also possible that Chancellor Reeves opts to raise stealth taxes, via an extension of the fiscal drag to pay for a bigger defence budget,” said Mr Raja.
“There is a case for the UK Treasury saying that, for a fixed period, we’re going to carve the uplift in defence spending outside the fiscal rules,” he said in his podcast with George Osborne.
