‘The whole tax system needs radical reform’: Readers on Reeves’ fiscal trilemma

As warnings grow over a looming £50bn black hole in the public finances, many Independent readers have turned their attention to the difficult choices facing Chancellor Rachel Reeves ahead of the autumn Budget.

The National Institute of Economic and Social Research (NIESR) has said Reeves faces an “impossible trilemma”: raise taxes, cut spending, or abandon her self-imposed fiscal rules.

But with little “low-hanging fruit” left after years of austerity and Labour’s retreat from welfare reforms, pressure is mounting for the chancellor to consider new sources of revenue – chief among them, a wealth tax.

Some readers argued that higher taxes are now inevitable if the government wants to maintain public services and credibility in the markets. As one commenter put it:“We are poorer. We cannot afford the nice things anymore. If you want anything resembling the level of public services we used to enjoy, you have to be willing to pay more for them.”

Not everyone agreed, however. Some feared income tax rises would stifle growth and hurt struggling sectors.

Others saw untapped potential in taxing wealth, closing loopholes, or enforcing existing fines. There were also calls for Reeves to rethink the logic of her borrowing rules altogether.

Amid competing opinions, readers could agree on one thing: if Britain wants decent public services, someone has to pay for them.

Here’s what you had to say:

Basic rate income tax has never been lower

We are where we are because Brexit ripped £100 billion a year out of the economy, because Starmer refuses even partially to undo Brexit (e.g. the single market), and because the sunlit uplands Brexiteers promised us never arrived—and never will.

We are poorer. We cannot afford the nice things anymore. If you want anything resembling the level of public services we used to enjoy, you have to be willing to pay more for them.

If not, accept the inevitable cuts with good grace: winter fuel allowance, triple lock pensions, longer NHS waiting lists, bankrupt local councils, failing SEND provision for children and all the rest.

If you want to do something about these things, you pay.

SteveHill

Low-hanging fruit in tax reform

So much low-hanging fruit, which will also support other goals.

For example, fuel duty has been frozen for years – put it up. Fine levels and collection should be increased; many civil fines should be more means-tested and actually collected, from employing illegal workers to water pollution to fly-tipping. Currently, the record in this space is woeful. Fuel duty alone will raise significant sums.

JSMill88

How do you think Reeves should fix the public finances? Let us know in the comments.

Tax levers don’t work like a cars

The uncomfortable truth is that the ‘levers’ the Chancellor has at her disposal do not work like the levers of a car.

Raising tax levels decreases economic activity, so reduces tax take – oops! Decreasing spending decreases economic activity, so it reduces tax take – oops! Breaking her rules increases the cost of the debt, so increases spending – oops!

Despite the ridiculous metaphor of a ‘black hole’, £41 billion is a tiny proportion of the £1,200 billion budget. All that is required are minor tweaks. Presentation is everything, so attacking pensioners and children was pure stupidity. Everyone agrees the whole system needs radical reform. Labour is committed to that in its manifesto and needs to get on with it to have any chance of survival.

LordNelson3

This is a global problem

Economic problems are being experienced around the world. Britain is far from being alone in this. Brexit and Trump haven’t helped, of course. Before that, the privatisation of so many state-owned companies that used to invest in services (instead of pocketing the money) has led to much degraded service in many areas of the UK.

Worldwide, the multibillionaires haven’t had it so good for over a century, and yet people are led to believe voting (where democracy still survives) for the parties they finance will make things better… because so much of the press is in the hands of this minority. Raise taxes on certain goods and people.

BJC

Experiment with a wealth tax

I would love to see a wealth tax implemented. We’d soon see if the feared adverse effects come to pass or not.

I don’t live in the UK, so I’d be glad to see it become the subject of an experiment.

soccerdad

Rachel Reeves’ pledge comes back to bite

So, in a speech last November to the annual CBI Conference, who told them “I’m really clear, I’m not coming back with more borrowing or more taxes”? One Rachel Reeves!

She’s already broken her “pledge” on borrowing as, month on month, she takes in record amounts. Starmer refused to rubber-stamp her “pledge” to the CBI, and eventually – several months later – he wouldn’t count out tax rises in “unforeseen circumstances”.

Well, if those “unforeseen circumstances” are a £50 billion black hole created by Reeves, then she has to go. She will forever regret coining the word, which now comes back and bites her with a real financial black hole created by her in just one year.

Munch58

Equalise tax across all forms of income

Wealth taxes are the answer. Equalise taxes on all forms of income – salary, capital gains, dividends, etc. A 1% or 2% tax on all wealth over £5m or £10m.

Remove all tax loopholes such as trusts designed to avoid tax. Tax all companies and corporations on their UK activity, including profits exported elsewhere. For example, Amazon UK has paid no corporation tax for years.

SteveMarshall128

Increasing taxes while economy falters

Can’t make this up. Chancellor increases taxes and hurts the UK economy – then reacts by putting up more taxes.

Can’t believe we have another four years of this government. How many more in the retail and leisure sector need to lose their jobs before she learns?

Hard to say this about the Tories that brought us Brexit, but Sunak was doing a better job, with budding signs the economy was starting to recover.

DPLDN

Grown-up conversation on tax

A grown-up conversation needs to be had on tax and its purposes. You can’t pay less tax and have the quality of public services we had in the 70s.

We also need to recognise that income tax is progressive and can be made more so. Increasing VAT, cutting spending, taxing pensions, increasing pension ages, broadening the council tax base and charging more are all impactful on the poorest and those just managing.

The Thatcher neoliberalism of the last 50 years needs to be put to bed. We need to look at creating a fairer, more equal society, with good public services for all – provided through fair and progressive taxation.

Steene

Gambling and smoking, yes – but not drinking

“Some upward adjustments in ‘sin’ taxes on online gambling, drinking and smoking are inevitable, and thoroughly justifiable.”

Gambling and smoking, yes. Drinking, no.

So many pubs, bars, venues and clubs are already closing on a daily basis, as drinks prices are so very high. Hitting them even more isn’t going to help the hospitality and entertainment industries at all.

Can’t she target the large companies that pay their staff such low wages that they need in-work benefits? We are effectively subsidising their profits anyway (and many companies seem to be having high or record profits).

Someone182

Undo Brexit and recover lost growth

Something has to give, and that something is taxation.

I don’t share your confidence that this automatically means only higher-rate taxes. There are very good reasons for saying the 20% basic rate is historically, and unaffordably, too low.

There is a fourth option (to taxes, cuts, or borrowing): undo Brexit, and put that missing £100 billion a year back into the economy. At a minimum, we should be looking to rejoin the single market.

SteveHill

Quantitative easing funnels money away from services

What most people don’t realise is that this huge level of interest is created every time the government carries out quantitative easing, since we moved from the gold standard.

Before, the government just printed money, which caused inflation. Now, when they print money, we still get inflation, but have to pay commercial banks interest for doing it.

It’s a crazy system that funnels money away from public services, public wages, etc., to private investors. That’s the real problem.

ficklepickle

Some of the comments have been edited for this article for brevity and clarity.

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