Chancellor Rachel Reeves could hike taxes by as much as £25 billion after she reviews public finances, according to Michael Saunders, the former Bank of England rate setter.
Saunders, now a senior adviser to Oxford Economics, predicted Reeves would take a "kitchen sink" approach when updating the public on the country’s finances.
He suggested the chancellor will reveal all financial challenges early to pave the way for the tax hikes while attributing the issues to her Conservative predecessors.
In her initial speech as chancellor, Reeves said she had told Treasury officials to conduct a thorough evaluation of government spending and public finances.
Findings are expected to be presented on Tuesday before the parliamentary summer recess.
Reeves previously warned that Labour had inherited the worst economic conditions from Rishi Sunak’s government since the Second World War.
Saunders forecasts that the review will present a grim outlook, indicating a need for increased public spending, more financial headroom, and fiscal tightening over the next five years.
He speculates that Reeves could raise funds through changes in the capital gains tax regime and by limiting tax reliefs that cost the government £200 billion annually.
Reeves and Keir Starmer have pledged not to increase the main rates of income tax, VAT, and national insurance.
Therefore, potential tax adjustments might involve less significant taxes, while there is also the suggestion that borrowing could be increased temporarily.