Markus Andrews

Last week’s embarrassing climbdown on welfare saw the government’s benefits reforms gutted almost entirely, while savings from the bill were slashed from £5bn to nothing. In the wake of the U-turn, there are now growing questions over how the government will raise the money to fill the black hole in the public finances.Ministers have already squeezed significant savings out of their departments in cuts that were unveiled at last month’s spending review, meaning there is now a mounting expectation that the chancellor will be forced to raise taxes instead. But Labour’s manifesto pledge not to raise taxes on “working people” leaves the chancellor with a limited number of workable options. A few possibilities were floated by deputy prime minister Angela Rayner in a leaked memo to Rachel Reeves ahead of the spring statement, which saw her urge the chancellor to raise taxes – suggestions which were ignored. But perhaps this week’s welfare climbdown will leave the chancellor with no option but to look again at Rayner’s suggestions. The chancellor is said to have warned her colleagues there are no longer any low-hanging fruit for her to raise billions, meaning any tax hikes in the autumn Budget are set to be painful for Labour.Here, The Independent takes a look at a number of tax rises that the government could rely on to raise funds and balance the books. Tax threshold freezes The Treasury’s most likely move would be to extend the freeze on income tax thresholds. This means that as wages rise with inflation, over the years workers are dragged into higher tax bands and end up paying more. A freeze on the threshold at which the higher 45 per cent tax rate is paid was one of the options suggested by Ms Rayner in her leaked memo. But there is growing speculation the government could extend the freeze across all tax brackets. At PMQs on Wednesday, Sir Keir left the door open for such a move, refusing to rule it out. While he gave an unequivocal answer ruling out increasing VAT, income tax or national insurance, he refused to do so when it came to tax threshold freezes. It’s a stealth tax, the impacts of which are not felt immediately, meaning it is normally better received among the general public compared with a direct hit to businesses or pay slips. But, if the freeze were extended to the end of the parliament, it could also bring in billions for the Treasury as earnings rise. The freeze, which is already planned to last until 2028, is expected to drag around two million workers into higher tax bands.Wealth tax There have been calls from Labour MPs on the left of the party to introduce a wealth tax, calls which have only grown in the wake of Tuesday’s welfare climbdown. Rachael Maskell, the architect of the rebellion which forced the government into shelving key pillars of the bill, demanded the government increase taxes on the very richest to pay for the £5bn climbdown. Polling conducted by YouGov on behalf of Oxfam on the eve of the spring statement found more than three-quarters of people (77 per cent) would rather the government increase taxes on the very richest to improve public finances than see cuts to public spending. However, such a tax – which could look like a 2 per cent tax on net assets worth more than £10m – is thought to be very hard to implement, and could also lead to some of Britain’s highest earners leaving the country. But Sir Keir Starmer’s Blairite policy chief, Liz Lloyd, has reportedly warned the PM against implementing a wealth tax, amid fears about an exodus of high net worth individuals from Britain. The PM is therefore expected to block the mounting calls. While Downing Street sources have suggested a wealth tax is not on the table, the prime minister failed to rule it out at PMQs on Wednesday. Capital gainsCampaigners on the left have long called for capital gains to be equalised with income tax, believing that workers should not pay a higher levy than those earning money through the appreciation in value of assets. The tax, paid on the increase in value of an asset such as a house when it is sold, is charged at 24 per cent on most things, while income tax can be as high as 45 per cent. “Those people go out to work every day to keep our public service going, work in our factories, drive our economy. Where is the equity there?” Labour MP Andy McDonald said on Times Radio.Ms Rayner also called for the lifetime pensions allowance to be reinstated. The allowance, which puts a cap on how much savers can put into their pension pot before a higher rate of tax is applied, was axed by the Tories. Labour had initially planned to reinstate the cap, but the plans were abandoned ahead of the election. However, amid the controversy over cutting winter fuel payments – and then later reversing the decision – the government may be hesitant to introduce any other policies which would upset pensioners. Corporation tax The chancellor could also look at increasing corporation tax for banks – one of the suggestions included in the deputy prime minister’s memo. Politically, its fairly easy to tax banks as there is limited direct impact on voters. But it’s important to note that banks in the UK are already highly taxed. They pay normal corporation tax of 25 per cent, plus a bank surcharge of 3 per cent. On top of this, they pay a bank levy of 0.1 per cent of their balance sheets. The deputy prime minister also proposed raising tax rates on dividends – a portion of a company’s earnings received by a shareholder – for higher earners. Currently, tax is not paid on dividend income that falls within your income tax Personal Allowance. There is also a £500 dividend allowance each year, meaning individuals only pay tax on any dividend income above this. Removing it altogether would be worth £325 million a year, HMRC data indicates. However, there are concerns that raising dividend tax rates could discourage people from investing in companies – which is likely to have a net negative impact on the economy. Ms Rayner also suggested ending inheritance tax relief on shares listed on the smaller Aim stock market. The Aim stock market is a sub-market of the London Stock Exchange. From April 2026, qualifying Aim shares held at the time of death will be eligible for 50 per cent relief from inheritance tax – but Ms Rayner has suggested ending this entirely. While these changes might make businesses uncomfortable, they’re actually unlikely to raise much money for the Treasury – meaning it’s a less likely option for the chancellor. More

Government failings over the compensation offered to victims of the infected blood scandal has left them facing a “new and different layer of psychological pain”, a damning report has concluded. A report into the compensation of victims and others affected by the scandal found that they have been ignored, branding the British state’s apology meaningless unless they are given greater involvement. Sir Brian Langstaff, chairman of the official inquiry into the infected blood scandal, said: “Decisions have been made behind closed doors leading to obvious injustices.” Chairman of the Infected Blood Inquiry Sir Brian Langstaff said last year that people affected by the scandal should face no more delays (Big T Images/Infected Blood Inquiry/PA) More

Facebook owner Meta has opened a new audio research lab in Cambridge as part of the tech giant’s push into AI glasses.Bosses at Meta met Chancellor Rachel Reeves on Wednesday morning as they launched the £12 million facility.It came amid reports the Facebook and Instagram owner has purchased a minority stake in Oakley and Ray-Ban owner EssilorLuxottica SA, the world’s largest eyewear business.It is reported the company’s stake will be worth around three billion euros (£2.6 billion) and be worth just under 3% of the Paris-based business.Meta has outlined plans to rapidly grow its AI glasses business, with Ray-Ban Meta and recently announced Oakley Meta products.The Silicon Valley business said its expansion plans in this area have seen it invest in the new audio research lab in Cambridge, designed to “advance spatial audio and machine learning for Meta’s future AI glasses”.The facility includes “reverb rooms and ultra-quiet acoustic chambers” in order to hone the audio quality of its products under development.Meta employs more than 5,500 people across its UK operations.Joel Kaplan, chief global affairs officer for Meta, met Ms Reeves at the site and underlined the group’s commitment to investing in the UK.Mr Kaplan said: “Creating this world-class audio lab in Cambridge is a sign of our long-term commitment to the UK and our belief in the top engineering talent it produces.“We want the brightest minds to make sure our smart glasses have the smartest AI-powered audio so you can focus on what you’re listening to no matter what’s going on around you.“I can’t wait to experience the results of the work the lab produces.”Ms Reeves said: “Meta’s investment is a huge vote of confidence in the UK as a hub for world-leading research and innovation while helping to supercharge the potential in the Oxford to Cambridge growth corridor.“We want our high-tech industries to continue to lead the world in years to come which is why we’re backing our innovators, researchers and entrepreneurs with a record £22 billion in R&D (research and development) funding, creating the opportunity for good jobs and investment in Britain, and delivering on our plan for change.” More

The construction of HS2’s physical structures should have been “largely completed” by now under the project’s initial timeline – but it is actually just over halfway there, the project’s chief executive has admitted.HS2 Ltd chief executive Mark Wild blamed major delays in the execution of the project on “inefficiency of work” as a result of the decision to start construction work before the finalised design or consents were in place. Giving evidence in front of the Commons Transport Select Committee, HS2 Ltd chief executive Mark Wild admitted: “The construction of the civil engineering should have been largely completed by now.“The reality is we’re about 60 per cent complete.”The Department for Transport regards estimates that HS2 could cost up to £80 billion in current prices as ‘unreliable’ (Jonathan Brady/PA) More

The loan of the Bayeux Tapestry to the British Museum is meant to symbolise the “close and deepening” relationship between the UK and France.But it is also an uncomfortable reminder that small boats crossing the Channel is not a new problem, and it can end up leaving one in the eye for the leader in England.Leaders coming from France have their own agenda, even if the entente is a great deal more cordial now than in the days of William the Conqueror.The impressive speech by President Emmanuel Macron in his second language for more than half an hour to a joint sitting of the Houses of Parliament on Tuesday was full of warm words and a desire, in particular, to unpick Brexit.The Princess of Wales looks on as King Charles and Emmanuel Macron toast at the state banquet More

Sir Keir Starmer and Emmanuel Macron will hold Downing Street talks on Wednesday amid growing pressure on the prime minister to strike a deal to bring down the number of small boat crossings. The French president arrived on Tuesday for the first state visit by an EU head of state since Brexit.It comes as the UK has been pressing for tougher action from the French authorities on the beaches along the Channel coast.The prime ministeris facing a fight to salvage his much-vaunted “one in, one out” deal with France to return illegal migrants and halt the increasing crossings of small boats across the English Channel.Downing Street has credited Sir Keir Starmer’s ‘reset’ with Europe for bringing about a change in French tactics on small boats More