Our new government, and in particular, Rachel Reeves, the new Chancellor, will be responsible for raising the funds that our new government requires to finance its activities.
The government has already declared that it will not increase Income Tax, National Insurance or VAT and government borrowing has to remain within tight limits. In which case, the only source of new money has to come from revenues raised from economic growth – more activity, more tax revenues.
Rachel Reeves is no stranger to government financing as she was an economist at the Bank of England. It will be interesting to see how the Treasury manages government finances if growth is slow in the coming months. For example, will the new Chancellor find it necessary to raise other taxes to meet funding requirements.
Income Tax, National Insurance and VAT are our major taxes but there is speculation that Inheritance Tax, taxation of dividend income and perhaps Capital Gains Tax may come under the Chancellor’s microscope.
The Autumn review is the next “normal” time for the Chancellor to review the state of the UK’s finances but as our new government flexes its muscles, don’t be surprised if the Chancellor announces some changes in the coming weeks.