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IPPR lays out a fair and growth-focused tax-plan that closes the fiscal gap and protects working people
Tax those with unfair advantages and profits before working households, think tank argues
Addressing inefficiencies in the tax system and doubling fiscal headroom to £20 billion will boost investment

The chancellor should use this month’s Budget to set out a fair and credible plan for closing the fiscal gap – one that protects public services and supports stronger economic growth – according to the Institute for Public Policy Research (IPPR).

With the Office for Budget Responsibility (OBR) expected to confirm a fiscal shortfall, IPPR warns that deep spending cuts or higher borrowing would be both economically risky and politically unsustainable. This leaves one realistic option: taxes will need to rise.

Higher taxes are rarely popular, so the government must pick the right fights: targeting unfair tax advantages for those with large amounts of wealth and unfair profits before asking working households to contribute more. In doing so, it can deliver a fairer budget that leaves us with a better tax system. A popular budget is also a more credible budget that will strengthen confidence in the UK’s finances.

IPPR recommends increasing fiscal headroom by around £10 billion to provide a buffer against shocks and strengthen market confidence. Structural fiscal reforms, such as reviewing the triple lock on pensions, would further demonstrate that the government is serious about disciplined finances.

Taxes should rise in line with measures to improve the system, for instance, by ending arbitrary tax breaks for certain types of income and reforming our Byzantine property tax set up.

IPPR’s proposed package includes:

Reform property taxation so that owners of the highest-value homes contribute more – raising bands F–H to raise £3.9 billion and cut council tax for four in five households.
Reform capital gains tax to cut rates for most people, while raising £12-16 billion by closing loopholes that allow income from wealth to be taxed more lightly than earnings from work.
Levying National Insurance Contributions on landlords and partnerships, who are currently exempt without any economic rationale.
Targeting unfair profits, including through reforms to gambling tax and addressing losses from the Bank of England’s quantitative easing programme.

IPPR warns that if the OBR’s forecast reveals a larger-than-expected fiscal gap, the chancellor may also need broader-based measures – to follow only once wealth and windfall taxes have been exhausted. Options include:

Extending the freeze on income tax thresholds, raising additional revenue without increasing headline rates.
Taking first steps to fold National Insurance into income taxation to ensure income is taxed consistently across the economy.
Raising income tax rates to avoid damaging cuts to essential services.

Part of the revenue raised should also be used to lower the cost of living, with an attention grabbing “war on bills” agenda, including cutting council tax for four in five households and reducing energy bills. This would also involve picking fights with corporations that are demonstrably reaping unfair profits, raising bills for consumers. This will help demonstrate that higher contributions deliver real benefits that people can feel.

Carsten Jung, associate director for economic policy and AI, said:

“This Budget must show that the government is picking the right fights by taxing those who currently have arbitrary and unfair tax advantages. Doing so can level the playing field, and boost efficiency and growth.

“The Budget must also demonstrate that the government can bring real, tangible change. It should launch ‘a war on bills’ – a relentless campaign to lower the cost of living, picking fights on behalf of working people. This should start with energy, food and council tax. Together with repairing public services, this budget can be living proof that the government is on people’s side.”