Four ways Labour could raise money in the Budget without hiking income tax
ByBen ChuPolicy and analysis correspondentPublished5 hours agoWe're likely to hear a lot about the chancellor's "headroom" in this Budget. That is the cash buffer the government has to help meet its own fiscal rules and reduce borrowing. Economists think the buffer might have halved in the last six months from around £24bn to as low as £11bn, in part because of rising interest rates the government has been paying to borrow money from private investors. The Chancellor, John Healey, might need to raise money to restore it, which would show the government's plan to reduce borrowing by the end of this Parliament is still on track. At the same time, he is under pressure to find money to help people with the rising cost of living and to fund spending on defence. However, Labour's 2024 election manifesto pledged not to raise the rates of income tax, VAT or National Insurance. Increasing taxes on capital gains or extending the mansion tax had been raised as possible options but have since been ruled out by government sources. BBC Verify has looked at what other options could be on the table for the chancellor to raise some more money, external on Wednesday. Banks in the UK have seen profits rise in recent years because they have been able to charge people higher interest rates when borrowing money. And there is widespread belief among bank bosses that the chancellor is preparing to raise taxes on banks in this week's Budget. Think tank Tax Policy Associates estimates, external that increasing the surcharge that banks pay on corporation tax from 3% to 5.5% could potentially raise an additional £1bn to £2bn a year for the Treasury. A higher tax would initially reduce the profits that banks have to distribute to their shareholders. Some shareholders will be wealthy investors. The banks have warned that additional taxes could deter them from investing in the UK, external, which could reduce jobs.