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The Chancellor must plug a £50 billion black hole in the nation’s public finances, with at least a 2p hike to the basic rate of income tax likely to be needed, a major economic think tank has warned.

The National Institute of Economic and Social Research (Niesr) has further raised the spectre of tax increases at the upcoming November 26 Budget as it said it believes Labour Party Chancellor Rachel Reeves is on track to miss one of her fiscal rules by £38.2 billion in 2029-30.

It said the Chancellor will likely need to break her manifesto pledge and increase income tax, rather than “messing around” with changes to marginal taxes, which it argues would be more damaging to the economy in the long run.

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