Plugging the gap: Nine bold ideas for Rachel Reeves’ Autumn Budget (part 1)

The chancellor has an opportunity to reform the tax system in its entirety. Will she seize it?

Rachel Reeves Pic: UK Parliament Flickr

Well, I don’t know about you, but I’m glad I’m not Rachel Reeves.

While many MPs were soaking up the last of the summer sun, the Chancellor was holed up in No.11, no doubt wishing she could be anywhere else.

This autumn, she faces an exhausting equation. Public finances are tight, and voters are impatient for visible improvements in their lives. The stakes could not be higher: if living standards continue to stagnate, the populist right will keep making hay. Labour know that to survive the next four years, let alone win re-election, they must deliver tangible improvements. Austerity, managed decline and book-balancing simply won’t cut it for UK voters.

Reeves cannot afford to retreat into stealth taxes and tinkering, nor can she cut her way out of this mess. The needs of the economy are too big for sticking plasters. She must find bold but credible ways to raise revenue, while keeping Labour’s fragile coalition of voters onside.

That’s why The Lead has asked a range of economists, campaigners and policy thinkers for their single best idea to raise money fairly. Some are radical, others are tweaks, but all are serious, credible options.

Here are the first five ideas, and they’re bound to spark debate. Which would you choose? Or do you have a better idea? Let us know in the comments.

1. Go for capital, corporations, and land

John McDonnell, former Shadow Chancellor and Labour MP

The problem the government has consistently faced in both its last budget and now in the coming budget is that there has been a lack of honesty with people about the scale of the crisis in our country.

Fourteen years of austerity under the Conservatives has resulted in over 14 million people living in poverty, including 4 million children. Yet we now have over 150 billionaires and the top 50 richest families own more than 50 per cent of the population.

Until and unless we have a government that will address this grotesque level of inequality in our society, we will never have the resources we need to end poverty and invest in the quality public services we need.

So rather than jumping from one tax cut or measure to another, what is needed is a strategy to redistribute wealth through a fair tax system. This would include several short-term measures to deal with the immediate cost of living crisis people are experiencing, and then a start to the work on introducing medium-term reforms that will put in place a strong and stable tax base.

The immediate fundraising measures should include taxing capital gains and dividends at the same level of taxing income tax and an increase in corporation tax. Over the last year, the banks have made massive record profits estimated at £48 billion. A windfall tax set at the same level as the Energy Profits levy would bring in £11 billion.

To establish a firm tax base for the future, two medium-term measures should be on the agenda: a wealth tax and a land value tax.

The introduction of a wealth tax of 2 per cent on wealth over £10 million is estimated to raise up to £20 billion. For those people who seek to leave our country to avoid paying their share of taxes, an Exit Tax may disincentivise them.

The government should also start work now on introducing a land value tax, which assesses the value of the land a person or a company owns and levies a tax on that value. In this way, when public investment in an area increases the value of land, this value is captured to benefit everyone.

2. Scrap the ’90s relic

Andrew Dixon OBE, Founder of Fairer Share

Across the UK, millions of people are being punished by a tax system that makes no sense.

Council Tax is based on 1991 valuations, a time when house prices were still within reach for many families. Stamp Duty, meanwhile, penalises movement and locks people into homes they have outgrown or can no longer afford.

This is not just inefficient. It is unjust. People in modest homes in northern towns pay a higher share of their home’s value than those in multimillion-pound properties in London. And tenants are footing bills that should be the responsibility of owners.

The way we tax property in Britain is outdated and regressive, and the public knows it. Council Tax arrears now exceed £6.6 billion, with no sign of slowing.

Here at Fairer Share, we propose that the Chancellor scrap Council Tax and Stamp Duty entirely and replace them with a Proportional Property Tax, levied at 0.48 per cent of current property value paid by the owner, not the occupant.

This reform would cut bills for 77 per cent of households, with average annual savings of £556 per family, eliminate unfair enforcement practices like bailiff action and unblock housing mobility, and support economic growth.

But mostly, this reform would demonstrate fiscal responsibility – and the policy can be revenue neutral or be configured to generate a surplus.

Crucially, it would be fair, progressive, and popular. A majority of the public, across all major parties, backs a tax based on actual property value, not outdated bands. As Rachel Reeves faces tough fiscal decisions, this is a rare win-win: raise revenue, cut bills, and restore trust in the tax system. Britain deserves a property tax fit for the 21st century.

3. Tax the super-rich

Caitlin Boswell, Head of Advocacy and Policy, Tax Justice UK

We all know a number of things to be true heading into the Autumn Budget.

People up and down this country are struggling. Inequality and poverty are rife. Millions are reliant on food aid, while the wealth of the super-rich continues to grow. Less than 50 families own more wealth than 30 million people.

This is causing Rachel Reeves headaches as we approach a fiscal moment where the electorate is demanding improvements to their lives and the country. The threat to this government is very real. Unless the government acts with bold conviction, the next election could spell irreparable damage to the Labour Party.

It doesn’t need to be this way. Britain is extremely wealthy; it is the sixth-richest country in the world. An annual net wealth tax of 2 per cent on assets over £10m - affecting just 20,000 people, or 0.04 per cent of the population - could raise tens of billions of pounds a year. With a net worth of £11m, you would pay £20,000, or with a net worth of £1bn, you would pay just under £20m.

The government would need to get HMRC working on this right away, learning from other countries and utilising the brightest public taxation minds to make it work. It is entirely plausible that it would, and it is backed by some of the most credible economists.

Revenue could be invested in ensuring everyone gets the healthcare they need; building safe and secure social homes; and a plethora of other public services that improve the social security net and stimulate resilience in the economy, in turn improving lives.

Despite what vested interests would have you believe with dodgy data, most millionaires are here to stay and want to pay more tax. There are plenty of other options available to the Chancellor that reform the tax system, making it fit for purpose and providing transformative revenue to invest in Britain, that may just give the government a glimmer of hope at the next election.

4. Bet on fairness

Pranesh Narayanan, Senior Research Fellow at Institute for Public Policy Research

In their first year, Labour have set out several long-term strategies to change the country and improve the economy, but people are crying out for something that has an immediate impact. By spending around £3 billion a year to remove the two-child limit and benefit cap, the Chancellor could lift 500,000 children out of poverty overnight. Here’s a plan to raise the money to fund this.

Gambling companies are undertaxed. The industry pays no VAT. Online casinos have become far more commonplace, and many companies who run them are based offshore, not liable to pay any corporation tax despite making profits from UK-based gamblers. There’s strong evidence that substantial profits are made from problem gambling, despite the industry’s insistence that this isn’t the case.

The government could raise £3 billion from making changes to gaming duties where there are particular disparities. Remote gaming duty, which applies to online casinos, is currently set at 21 per cent. Machine games duties, on things like slot machines, are mostly around 20 per cent. General betting duties, which apply to things like sports betting, are 15 per cent. Horse-racing gets an additional 10 per cent levy from the Horseracing Levy Board to take this up to 25 per cent. The Chancellor could raise the additional revenue by raising remote gaming duty and machine gaming duty to 50 per cent and raising the general betting duty from 15 per cent to 25 per cent, bringing other forms of gambling in line with horse racing.

This simplifies the system, and it’s hard to avoid. Betting companies might worsen their odds for customers in response, but even if there are fewer gamblers as a result, they’ll maintain their margins and end up paying more tax anyway. And crucially, this would raise the funding the government needs to lift half a million children out of poverty.

5. Restore power to the people

Sarah Longlands Chief Executive of Centre for Local Economic Strategies

Local government is trusted more than Central government in Westminster. That has been the consistent message from polling research in recent years.

However, despite this, local government can still raise less than 6 per cent of its annual revenue locally. This makes it hugely reliant upon central government, which has consistently tended to under-value and underestimate the importance of local government for our quality of life and democratic stability, but potentially because of how it can intervene to increase the flow, circulation, and ownership of wealth.

So what if we were to turn tax on its head and give local government much more devolved power to raise taxes? Not simply to deliver services, but to help ensure that more of that tax found its way into the local economy, supporting local jobs, investing in local businesses and building affordable homes, and strengthening democracy in the process.

The financial crisis hitting local authorities across the UK is driving the push towards a debate on fiscal devolution. Research by both the LGA and the LGIU has highlighted the year-on-year challenges of balancing the growing demand for council services, particularly social care and temporary accommodation, with an ever-diminishing grant from central government. The possibility of tourism taxes is currently being debated as part of the English Devolution Bill, but this needs to be the start rather than the end of the conversation when it comes to the potential and scope of fiscal devolution.

To give you a place-based flavour of what income tax devolution might look like, we (very roughly) estimate that a proportionate share of income tax would’ve been £5.1bn for Lancashire in 2024/25.

Fiscal devolution is no substitute for a long-term funding settlement and should not be seen as such, otherwise, we risk a race to the bottom when it comes to fiscal incentives to ‘sell out’ to pay out for essential local services. So not only do we need to ensure that fiscal devolution comes with a clear national framework of priorities to protect the vulnerable, existing tax income needs to be made available to support the place-making work of local authorities – now and in the longer term.

So, that’s five ways Reeves could start raising money fairly without defaulting to stealth taxes or deep cuts. But we’re not done. On Saturday, we’ll be back with four more, from rethinking pensions to taxing flights.

Thanks for reading - do let us know your views in the comments about the route Reeves should take. And part two will be with you on Sunday with more ways to plot a way forward financially for the country. If you’re new to The Lead make sure you’re signed up to receive it direct. ■

About the author: Zoë Grünewald is Westminster Editor at The Lead and a freelance political journalist and broadcaster. Zoë previously worked as a policy and politics reporter at the New Statesman, before joining the Independent as a political correspondent. When not writing about politics and policy, she is a regular commentator on TV and radio and a panellist on the Oh God What Now podcast.

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Away from tax and we’ve also been taking a look at Starmer’s plans to spend, we consider how Labour is finally heeding a call to invest in the communities and the lack of services which are leaving a gaping hole in which the division and hate spouted by Reform is growing. We’ll have more as Labour Party Conference begins on whether this ‘deliverism’ is going to make a difference or is it too little too late?