Capital Economics has warned that the Government could raise taxes by up to £25bn in October’s Budget to fund spending pledges worth as much as £40bn, including council housebuilding, higher defence spending and cost-of-living support. The tax burden is expected to shift away from businesses towards capital, wealth and income, with households bearing most of the increase. Potential measures include higher capital gains and inheritance taxes, pension changes and a new defence or social care levy. Analysts say that some spending pledges could be delayed to limit the impact on household incomes and Prime Minister Andy Burnham has ruled out increases to income tax, National Insurance and VAT. Ruth Gregory, deputy chief UK economist at Capital Economics, says that if taxes were to rise by £25bn, equal to about 0.8% of GDP, then the tax burden would rise to a new high of 39% of GDP.
