The Resolution Foundation has urged Chancellor Rachel Reeves to consider a tax switch in her autumn budget: cutting employee national insurance by 2p and raising income tax by the same amount. The thinktank argues this could raise an additional £6bn a year and 'level the playing field' on income tax, as income tax applies to a wider group including pensioners, landlords, and the self-employed.
The proposal is part of a broader £30bn package of tax reforms aimed at reshaping the UK's tax system. While the switch would leave employee tax rates unchanged, it could risk breaking Labour's manifesto promise not to raise income tax. However, the Resolution Foundation says it would help address 'unfairness' in the system by spreading the tax burden more widely.
The thinktank, which has close ties to Labour ministers, also suggests extending employer national insurance to limited liability partnerships, tackling unpaid small-business corporation tax, and introducing a broader sugar and salt tax, a carbon charge for long-haul flights and shipping, and changes to vehicle excise duty based on road damage and pollution.
Reeves faces intense scrutiny ahead of her 26 November budget, with economists warning of a potential £40bn shortfall against fiscal rules due to welfare U-turns, higher borrowing costs, and a productivity downgrade. A Treasury spokesperson declined to comment on speculation, stating that tax policy decisions are made at fiscal events.
