Plugging the gap: Nine bold ideas for Rachel Reeves' Autumn budget (part 2)

Four more ideas that could change Rachel Reeves' equation from taxing ultra-frequent fliers more to raising the pension age faster

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Sep 27, 2025

flying plane on sky — *Dr Alex Chapman argues for taxing ultra-frequent fliers more* Photo by Kit Suman on Unsplash

On Thursday, we published five bold ideas to help the Chancellor raise revenue in this autumn’s budget. From scrapping Council Tax to a new wealth tax, our contributors showed there are credible, fair alternatives to stealth taxes or cuts.

Today we bring you four more. Some provocative, all serious, and each a reminder that the government has choices, if only it has the bravery to make them. Make sure you have your say in the comments and also vote in our poll on if you were the Chancellor which one you would be considering.

6. Kill the sacred cow

Daniel Herring, Head of Economic and Fiscal Policy at the Centre for Policy Studies

If Rachel Reeves were to head into the Budget looking purely at getting public spending down, she could do a lot worse than re-examine the state pension.

For one, it’s the largest item of state spending after the NHS. In 2024/25 it cost £138 billion and thanks to the triple lock, is guaranteed to rise by the greater of wage growth, inflation, or 2.5%.

The cost is phenomenal. The OBR estimates that it will rise to 7.7 per cent of GDP by 2070 but this could well be an under-estimate, they admit it could be more than 9 per cent. Somewhat perversely, worsening economic growth makes the state pension more costly.

However, it’s unlikely that the Chancellor would even touch it. As my boss Robert Colvile has pointed out, the triple-lock now looks like some deranged cult that every politician must submit to. It is seen as an absolute sacred entitlement, rather than a barely 15-year-old measure to protect against old-age poverty.

But the state pension is entirely dependent on a productive economy funding it. The idea of having paid in for your pot is a myth; you paid for yesterday’s pensioners and today’s workers pay for you.

So, we do need a more mature conversation about the affordability and purpose of the state pension, and the government could start the conversation by doing one of three things.

Option one, remove the triple-lock. A better system would be to grow the state pension at the same rate as the average wage over the long run, while protecting against inflation in any given year. This would mean that the state pension grows at the same rate as the economy grows - giving stability for pensioners and fairness for workers.

Option two, raise the pension age at a faster rate. It’s due to rise to 67 from 2026, and then to 68 from 2044. Keeping the triple-lock without sending pension spending skyrocketing above 6 per cent of GDP would mean raising the age well into the 70s by 2070 - that would be politically more difficult.

Option three, a government could means-test the state pension so that it only goes to recipients below a certain income and asset level. This is the approach Australia takes, with most people providing for their own pension through employer contributions in working life.

Those are hard trade-offs, but they ultimately recognise that there are limits to what can be provided by the taxpayer.

7. Cut the illusion

Will Cooling, author of It Could Be Said

Since Ken Clarke, Chancellors have used freezing income tax’s personal allowance to raise revenue by inflating away its value. In doing so, they avoid cutting people’s nominal take-home pay, as the taxman merely takes a greater proportion of people’s pay increases. That means whilst in real terms people are poorer, they still have more money in their bank account come payday than they did the previous year, dulling any backlash.

And yet it raises real money, with the annual freezes Rachel Reeves inherited from Jeremy Hunt now raising £7billion a year. But these cash infusions are slow to arrive, as inflation can only erode the personal allowance, one year at a time.

So rather than extending the freeze for an additional two years as is rumoured, Reeves should propose a cut to the personal allowance’s nominal value. Merely bringing forward these real-terms cuts in its value planned for the next four years could raise an additional £42billion this parliament, of which half would be available next year. Indeed, she has significant scope to go even further, given that today over a third of the median worker’s income is tax-free whereas in the last year of Gordon Brown’s Chancellorship, less than a quarter was.

No chancellor has been punished for messing around with the personal allowance and the money raised would provide her with the firepower to disarm misguided criticism about punishing the working poor by delivering more effectively targeted support to poor families through the benefits system. And perhaps most crucially, she would get the additional money now, allowing her to spend it whilst there’s still time for voters to see the impact before the next general election.

8. Tax the ultra-frequent flier

Dr Alex Chapman, Senior Economist at the New Economics Foundation

We need to make sure we deliver for Net Zero in a way that’s fair to everybody - that means the richest, who pollute the most, should be paying the most. At the New Economics Foundation, we’ve documented the rise of the ‘ultra-frequent flyer’ – a group of people who fly six or more times a year. They fill 30 per cent of the seats, but make-up just 3 per cent of the population. Taxing these people more would be an obvious win for the economy and the environment, but so far the chancellor has been too busy pursuing airport expansion to take notice.

It's ultra-frequent flyers that will fill the new airport capacity the government is planning, and it’s thanks to their excesses that air travel is likely to be the UK’s largest source of emissions by 2040. Our preferred way to tackle aviation emissions – and the fairest – is a frequent flyer levy, a tax that rises with every additional flight an individual takes in a year. The frequent flyer levy will take a bit of time to implement, and it doesn’t negate the need for an effective carbon tax, something else the chancellor should address.

As it stands, carbon taxation of air travel is a broken mess. Next year the current system is likely to add £10 to the cost of a short-haul flight to Europe, but remarkably, if you fly out of Europe, you’ll pay next-to-nothing. That means there is a perverse incentive to actually fly further and do more damage to the climate. The government could immediately close this loophole by applying a carbon price floor to flights to non-EU destinations, and we estimate the policy could raise up to £3.4bn per year in the short-term.

9. Break the banks

Rachael Henry, Head of Advocacy at the Institute for Public Policy Research,

In 1981, Margaret Thatcher announced a windfall tax on banks. Her justification: “They had made their large profits as a result of our policy of high interest rates, rather than because of increased efficiency or better service to the customer.” In response, 364 economists criticised the policy in a letter in The Times - but the tax went through without the doomsday prophesied.

Forty-four years later, and a far less radical proposal to tax banks is on the table, put forward by the Institute for Public Policy Research.

Currently, public money is flowing straight into commercial banks’ coffers thanks to an outdated arrangement with the Bank of England’s “quantitative easing” programme. This once made profits for the Bank, when interest rates were low. But now rates have increased, it is costing the taxpayer a staggering £22 billion every year, with much funneled to commercial banks’ shareholders. What started as a programme to boost the economy is now a massive drain on taxpayer money.

And all the while, Banks are making record profits - HSBC, Barclays, Lloyds and NatWest profits have doubled, up by £22 billion, compared to before the Covid-19 pandemic. While families struggle with rising costs, the government is effectively writing multi-billion-pound cheques to bank shareholders.

IPPR proposes to target a tax at the windfall profits directly linked to the “quantative easing reserves”, which could raise up to £8 billion a year.

In her search for tax-raising measures at what is set to be a tricky Autumn Budget, will Iron Chancellor, Rachel Reeves, take a leaf out of the Iron Lady’s book and tax the banks?

Between yesterday’s five and today’s four, we’ve shared nine ways Rachel Reeves could rethink Britain’s tax system: bold, fair, and credible reforms that could raise billions. The question now is whether this Chancellor dares to run with any of them.