Other measures would better serve the British economy, Fund claims
The International Monetary Fund (IMF) has cautioned UK chancellor John Healey against raising bank or worker taxes in this month’s budget, instead urging property tax reform, more targeted welfare spending and wider sales taxes.
Healey hasn’t ruled out increasing taxes on banks in the looming budget, set to be unveiled on October 28, but IMF deputy director for Europe Helge Berger told reporters there were other measures the government should prioritise.
“There are still areas where Britain can make additional fiscal headroom available: modernising the property tax [system], broadening the basis of sales taxes, like VAT. We would not recommend increasing labour taxes,” Berger said.
The current bank profit surcharge produces about £1 billion annually for the UK economy – and tax revenue is already at a historic high, the IMF pointed out.
Meanwhile, the Housing Policy Delivery and Oversight Committee has said the Office for Budget Responsibility (OBR) should consider the impact of its budget plans on the housing market and a possible risk to housing delivery.
Analysing the government’s housing policy performance, the committee also called for Stamp Duty Land Tax (SDLT) changes and the removal of VAT on household refurbishment projects, as well as relaxed planning requirements for smaller developers.
“Housing can be a tremendous engine for growth in the economy, and we support all efforts to improve quality and delivery,” Sir Vince Cable, chair of the Housing Policy Delivery and Oversight Committee, said.
The OBR, he added, is the “natural place” for assessments to take place of how budgetary decisions can affect the housing market.
The budget is also expected to reveal further details about the newly-announced Your First Home scheme, in which the government will back equity loans to help first-time buyers enter the housing market.
According to proposals, eligible first-time buyers purchasing a new-build home would be able to secure a deposit of 2.5% when buying from a participating developer, with the government providing an equity loan of 20% and an interest-free period.
The government faces a difficult balancing act as it prepares its first budget under prime minister Andy Burnham.
Its borrowing costs have swelled to the highest among G7 advanced economies, surging to their highest level since 1998 amid chaos in the bond market. The OBR is also scheduled to reveal its updated forecasts alongside the Budget on October 28.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
