Rachel Reeves could raise as much as £45bn in taxes without breaching Labour’s manifesto promises, according to a report by US investment bank Morgan Stanley. The analysis comes ahead of the chancellor’s budget next month, where she is expected to announce measures to cover a potential £30bn shortfall in the public finances.
Economists at Morgan Stanley highlighted a series of trade-offs between tax rises, spending cuts, and limiting political and economic fallout. They identified approximately £25bn of measures that “don’t breach the spirit of the Labour manifesto, are not outright inflationary, and can be implemented at a gradual pace.” The bank warned that a more aggressive approach, breaking manifesto pledges, could be more “gilt market-friendly” but risked higher consumer prices and interest rates.
The report listed possible tax hikes, including extending the freeze on income tax thresholds for at least another year (raising £7bn to £10bn), as well as taxes on gambling, banking, changes to council tax, and an overhaul of pension taxation. These could collectively raise between £25bn and £45bn, the bank said.
The analysis comes as the Office for Budget Responsibility is expected to hand its pre-measures forecasts to the Treasury on Friday, which will shape the budget on 26 November. Reeves this week warned Labour figures against abandoning fiscal responsibility, while Prime Minister Sir Keir Starmer described the fiscal rules as “non-negotiable”.
