Prime Minister Andy Burnham could raise taxes by as much as £25billion at the next Budget to fund his spending commitments, economists have warned.
Capital Economics said households, entrepreneurs and pensioners could face a greater burden as the government seeks to fund commitments on council housing, social care and defence while sticking to existing fiscal rules.
Ruth Gregory, of Capital Economics, said: “This tax-raising Budget could be almost as big as the last.”
She said: “With Labour MPs unlikely to stomach big spending cuts and the markets unlikely to tolerate big increases in borrowing, higher taxes perhaps worth up to 0.8% of GDP may do the heavy lifting in funding Prime Minister Burnham’s policy ambitions."
Potential measures identified by the consultancy include increases in capital gains and inheritance taxes, changes to pensions, taxes on banks and a possible new defence or social care levy.
Capital Economics warned a £25billion package would push the UK tax burden to a record 39% of GDP.
A Treasury spokesman said: “The Chancellor is fully focused on his priorities which will boost business, help with the cost of living and support people in every postcode.
“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.”