IFS flags £35bn spending pressure for Healey’s first budget
Under the proposal, online marketplaces would be required to collect VAT at source for all retailers on their platform whose annual turnover exceeds £90,000, the Times reported. The newspaper said Healey is expected to announce that the revenue raised will be used to fund cuts to business rates for high street shops.
The development comes as pressure continues to grow on Healey and Greater Manchester mayor Andy Burnham to provide relief to struggling small businesses on the high street before the budget on 28 October. Before his election in Makerfield, Burnham said he would increase the threshold for business rates so that 140,000 small high street retailers would not pay the tax.
Separately this week, the Institute for Fiscal Studies warned Healey that his budget risks being a “work of fiction” unless he identifies plans to cover £35bn in spending pressures. The IFS said the damage from higher inflation would force the chancellor either to top up funds for his current government spending plans or impose deep real-terms cuts by the end of the decade.
The Treasury received a more favourable signal from the International Monetary Fund, which this week upgraded its UK GDP growth forecast for this year to 1.3%, an increase of 0.3 percentage points from its July update. But the IMF also cautioned that Healey should “stay the course” on repairing the UK’s public finances. Silvana Tenreyro, the IMF’s economic counsellor, said the UK “stands out” among G7 countries in having a plan to narrow its deficit.
A Treasury spokesperson declined to comment on the specific proposal reported by the Times, saying: “As has always been the case, decisions on tax are a matter for the chancellor to set out at fiscal events rather than routinely commenting on rumour, speculation or proposals.”