Rachel Reeves is expected to raise taxes by around £30bn as she prepares to lift the two-child benefit cap, according to new forecasts from Goldman Sachs.
The Wall Street bank estimates the Chancellor is already facing a £20bn hole in the public finances, while additional commitments — including freezing fuel duty, increasing the benefit cap and providing support for household energy bills — will add a further £8bn to the burden.
Goldman also expects Reeves to rebuild her fiscal headroom by £5bn, bringing the total funding requirement to roughly £33bn. Of that, only around £3bn is likely to be met through spending cuts, meaning the bulk will need to come from tax rises.
Economist James Moberly said a series of smaller tax measures now looks far more likely after the Government reportedly stepped back from plans to raise income tax rates.
“An extension of threshold freezes combined with a series of smaller measures now looks the most likely avenue to raise revenues,” he said.
Goldman estimates that freezing fuel duty alone would cost around £3bn next year, falling to roughly £800m in subsequent years. Meanwhile, removing environmental levies from energy bills is expected to cost about £4.3bn in the near term, easing to around £3.5bn by 2029.
The projections suggest Reeves faces a delicate balancing act as she attempts to ease cost-of-living pressures while maintaining fiscal credibility.
