Think tank urges Chancellor to raise £8 billion in taxes as fiscal cushion shrinks

The Resolution Foundation cautioned that delaying tough budget measures would be the wrong strategy as the fiscal buffer has fallen from £24 billion to as low as £12 billion, partly due to the Middle East conflict. James Smith argued that the Treasury’s plan to push decisions to the next spending review risks worsening public finances. The institute proposes a two-pronged approach: immediate aid for families facing high energy costs and a reversal of the fuel duty freeze, which mainly benefits wealthier households.

It also calls for rebuilding fiscal headroom to at least £20 billion through spending restraint and roughly £8 billion of tax increases, including a 2p shift from National Insurance to income tax and closing capital-gains exemptions. Additional revenue could come from taxing partnership income, targeting self-employed, landlords and pensioners. Smith stressed the need for a budget that confronts these challenges now rather than postponing them.