Reeves 'may need £25bn'

RACHEL Reeves may need to raise up to £25bn from tax increases if she wants to keep spending rising with national income, the Institute for Fiscal Studies (IFS) estimates.

Even if the Chancellor changes the debt rule she inherited from the Tories, this would do “almost nothing” to ease the challenge on public service funding, the IFS said as it released its Green Budget report.

Because of her promise to meet day-to-day spending out of revenues, Ms Reeves would still need to turn to tax rises to avoid spending cuts and meet her pledge to borrow only to invest.

IFS director Paul Johnson said Ms Reeves’ first Budget, which she will deliver on October 30, could be “the most consequential since at least 2010”.

The report, funded by the Nuffield Foundation and using economic forecasting by Citi, analysed the challenges facing the Chancellor.