Blick Rothenberg, a leading audit, tax and business consulting firm, said the government will have to significantly increase tax revenue to compensate for the substantial increase in public spending announced in today’s spending review.
Robert Salter, the company’s director, warned that headline commitments such as the annual £11 billion increase in the defense budget annually may require a 1.5 liter base income tax rate if funded directly.
“Given the increase in government planned spending, tax increases will inevitably be added in the coming months,” Salter said. “The increase in defense budget alone is equivalent to a 1.5p increase in the base income tax rate.”
Prime Minister Rachel Reeves announced a spending review that includes a range of fascinating investments in cross-border defense, skills, infrastructure and housing. This includes £1.2 billion in training and apprenticeship, aiming to support Labour’s commitment to create 120,000 new skilled workers from 2030 to 2030.
While businesses may welcome the increase in funding, Salter raised concerns about accessibility: “In many cases, sadly, because many companies have limited conditions related to apprenticeship rates, additional funds may not reach the organizations that need it.”
Regarding energy policy, Salter praised the government’s ambition to improve domestic energy capacity and improve security, including investment in nuclear and carbon capture technologies. However, he warned of the risks of cost and delay.
“The costs of these major nuclear and carbon capture and storage facilities will be greatly exceeded and delivery deadlines will be missed. This is in the past.
Although the Prime Minister conducted a spending review around the theme of economic growth and security, Blick Rothenberg highlighted the disconnect between this narrative and some recent tax decisions by the government, especially the increase in state insurance contributions from employers earlier this year.
“Although Rachel Reeves continues to talk in the spending review on economic growth, economic security and the importance of these issues to workers, many measures previously announced by the government, such as the increase in employer Nice, have actually increased unemployment,” Salter said.
The remarks are made as the Prime Minister explains to the Prime Minister how the government will fund its long-term capital commitments without further increasing the tax burden on households and businesses.
With borrowing costs rising and debt interest at record levels, tax policy decisions in the coming months could impact the credibility of Labor’s broader economic plan, especially before the next budget and any fiscal rule assessment of the office’s budget responsibilities.
