IMF report and Budget renew debate on public service funding and wealth taxes

An IMF report and the looming Budget have sharpened the debate over how the UK pays for public services and who should pay more tax.

The IMF assessment earlier this week was broadly supportive of the public finances. It found that, compared with most countries, the UK government is reducing its deficit and, on its own projections, bringing debt under control. But that path relies on a very tight funding settlement for public services in two to three years' time.

The squeeze on departments was treated as a central risk. Inflation may help the deficit by eroding the real value of debt, but it also erodes the real value of budgets. Ministers are said to be struggling to balance the books because of inflation, existing spending restraints and the need to spend more on defence. The next Budget was described as very important.

On tax and welfare, one guest said the Budget would probably contain a bit of both tax rises and welfare savings. They argued that wealth inequality has worsened and that Labour's principle is that those with broader shoulders should carry the biggest burden. That case was challenged. Dan Neidle, a tax campaigner and expert, has noted that the top 1 per cent already pay a bigger share of total tax revenue than ever and has questioned whether asking them for more is sustainable.

Another guest said the Conservatives had been successful in getting high income earners to pay more income tax, while the current argument is about wealth held in property and other assets. They warned that wealthy people are already leaving the UK, that Rachel Reeves has accelerated that trend, and that further taxes on the wealthy in the Budget would kill the golden goose. The opposing view was that some wealthy people make a fuss about leaving and then return because Britain is a good place to live.