Labour’s Finances Are in a Black Hole – and the Chancellor Is Ready to Break Promises
What the “Black Hole” Means
There’s chatter that the UK’s public finances are sinking fast enough to call it a black hole. Some say the shortfall could be as large as £50 billion. If that’s true, the Treasury will have to rip up a few sheets from its own manifesto.
NICs – Raising Back the Bill
One of the likely fixes is a hike in National Insurance Contributions (NIC). The government is looking at raising the basic employee rate from 2 % to 3 %, which would net roughly £2 billion. A full restoration to the 12 % rate (the pre‑Hunt level) could bring in about £21 billion.
The “Core Taxes” Playbook
- Income Tax: A 4 p boost to the basic rate – nudging it up to 24 % – could add anywhere from £28 billion to £30 billion.
- VAT: A 1 % or 2 % raise on the standard rate, or a move back to multiple VAT rates, might lighten the hit on working‑class households.
- Fuel Duty: Historically frozen for political reasons, but it’s a straightforward stream that could be dialled up.
Extended Tax Band Freeze
The Chancellor could also hold tax bands and thresholds steady until 2029. Politically, this is a kid‑in‑the‑cafe move – no one notices the small shifts in the holiday home’s price tags.
Higher‑Rate Gains – A Minor Relief
Boosting the 40 % and 45 % brackets by a single penny gives just £1.4 billion and £250‑£300 million, respectively. A small win for the coffers, but not a miracle cure for the hole.
What’s the Bottom Line?
To keep the lights on without pledging austerity, the government faces two hard choices: keep their word and truly cut spending, or borrow and loom to the back of their fiscal pledge. The latter option sees the Chancellor doing the un‑lovable job of breaking promises to keep the economy afloat.
