Opinion: Where Will the Chancellor Look To Raise Tax?

Published on: 26 Oct, 2024
Updated on: 27 Oct, 2024

By Gavin Midgley

A senior lecturer in Accounting at the University of Surrey who gives his view of next week’s Autumn Budget, the first from this Labour Government.

There has been much discussion on whether the speculated increase in employers’ National Insurance contributions breaks the pledge to raise taxes for workers.

The argument can be made that even though employees won’t pay this increase, the incidence (or the burden) of tax will be shared, in that increased business costs could lead to increased prices or stagnating wages etc. Employees may also suffer from ‘fiscal drag’, where the tax thresholds remain fixed for a long period.

The Government will be hoping that they can keep inflation down, because if more people are pushed into higher rates of tax while living costs go up, workers may not feel any benefit in an increase in wages.

While Corporation Tax has been pledged to remain at 25 per cent, we could see reforms in business rates, or the introduction of measures (in line with Labour’s manifesto pledge) to “level the playing field’”between online and physical retailers. However, it remains to be seen how this will work in practice and could lead to increased prices and, given that this is a time where many households are finding finances tight, this could prove less popular than expected.

Increased wealth taxes are something the electorate always claims to want more of, but how effective they are at raising government revenue is an often-argued matter. But this could be the time for possible reforms such as, say, aligning the rates of Capital Gains Tax with income taxes.

There is also speculation that reliefs on private pensions may be curtailed, but with the recent commotion over winter fuel allowances for pensioners, this could also be used against them politically.

Finally, after many years of fuel duty freezes, it will be fascinating to see if this is an area where Labour highlights its green credentials with a substantial hike – potentially up to 7p a litre. This would undoubtedly receive negative press across the Conservative-leaning newspapers and raise intrigue as to whether the Government would counteract this with sweeteners in this Budget or wait until further into their regime.