IFS Warns Chancellor Rachel Reeves Nears Tax Rises Amid Rising NHS Spending

Chancellor Rachel Reeves faces warnings from economists and pension experts about potential tax increases despite her insistence that her spending plans are fully funded. HMRC research suggests possible changes to salary sacrifice schemes could remove income tax and National Insurance relief, effectively reducing pension contributions and imposing higher costs on employers, raising fears of a stealth tax raid on retirement funds. The Institute for Fiscal Studies (IFS) has highlighted that Reeves is close to needing further tax hikes due to the growing share of public spending devoted to the NHS, which will consume nearly half of day-to-day public service expenditures by 2028-29. Council tax is also expected to rise significantly, with local authorities likely to increase rates by the maximum 5% annually to help fund social care and police, although local officials warn this will still leave funding gaps leading to cuts. While Reeves has promised no tax rises on working people and capped council tax increases, economic contraction and external pressures, such as tariffs imposed by President Trump, add to fiscal uncertainty. Critics argue that Labour’s increased spending risks inflation and economic stagnation, with some viewing Reeves' spending review as a politically motivated shift to the left amid competition for the Red Wall vote.