Chancellor Rachel Reeves could raise as much as £45bn in taxes without breaching the spirit of Labour's manifesto, according to a report from Morgan Stanley. The US investment bank's economists expect Reeves to use next month's budget to cover a potential £30bn shortfall in public finances through tax increases.
Morgan Stanley identified up to £25bn in measures that would not violate Labour's manifesto, are not outright inflationary, and can be implemented gradually. These include extending the freeze on income tax thresholds by at least a year, which could raise £7bn to £10bn, as well as taxes on gambling, banking, council tax, and pension taxation.
The chancellor faces tough trade-offs between tax rises, spending cuts, and limiting political fallout. Labour is bound by pledges not to raise income tax, national insurance, or VAT. However, Morgan Stanley suggested that breaking these promises could satisfy bond markets, as it would raise billions while limiting economic impact.
The Office for Budget Responsibility is expected to deliver its pre-measures forecasts to the Treasury on Friday, informing the 26 November budget. Reeves warned Labour figures against abandoning fiscal responsibility, while Prime Minister Keir Starmer called the fiscal rules 'non-negotiable'.
