By Basant El-Faramawy
Chancellor John Healey faces a shrinking fiscal buffer ahead of this week's Budget, with economists estimating the government's headroom has halved to as low as £11bn since spring. Labour's 2024 manifesto ruled out increases to income tax, VAT, or National Insurance, leaving the Treasury to explore alternative revenue sources. BBC Verify has outlined four potential measures.
Increase taxes on banks
Banks have seen profits rise as they charge higher borrowing rates, and a surcharge increase from 3% to 5.5% on corporation tax could raise £1bn to £2bn annually. Banks warn the move could deter UK investment, reduce jobs, and lead to lower savings rates or higher borrowing costs for customers.
Higher taxes on gambling machines
Former Prime Minister Gordon Brown has urged a doubling of the tax on electronic gaming machines from 20% to 40%, which the Social Market Foundation estimates could yield £275m to £460m. The machines are concentrated in deprived areas, and one in four users gamble at harmful levels. The industry argues the hike could force betting shop closures, threatening horse racing funding.
Make online marketplaces collect VAT
The Treasury loses an estimated £12bn a year in unpaid VAT, part of which stems from overseas sellers on platforms like Amazon, eBay, and Temu evading tax. Making the platforms responsible for collection could raise around £1bn annually. Amazon supports the move, estimating £700m in additional revenue, though some sellers may raise prices or exit the platforms.
Cut welfare spending
The three tax measures combined would raise at most £3.5bn, far short of the potential shortfall. Prime Minister Andy Burnham has called for a "fair and lasting" reduction in the welfare bill, while opposition parties propose far larger savings. Health and disability benefit costs are projected to rise from £68bn to £81bn by 2031. Previous attempts to cut £5bn were reversed after a Labour backbench revolt, and experts warn cuts risk pushing recipients into poverty unless paired with employment support.
