Chancellor John Healey is expected to focus heavily on fiscal “headroom” when he delivers Labour’s spring Budget on Wednesday, as the government grapples with a sharply reduced cash buffer for meeting its own borrowing rules.
According to BBC News – UK, economists believe the buffer may have halved over the past six months, dropping from approximately £24bn to as low as £11bn. The decline is partly attributed to rising interest rates the government pays to borrow from private investors.
The chancellor faces a twin challenge: restoring the headroom to demonstrate the government’s plan to reduce borrowing by the end of this Parliament remains viable, while simultaneously finding resources to address the cost-of-living crisis and increased defence spending. However, Labour’s 2024 election manifesto explicitly ruled out raising income tax, VAT or National Insurance rates.
Government sources have also dismissed earlier speculation about increasing capital gains tax or extending the mansion tax. BBC Verify has identified four alternative revenue-raising measures that could feature in Wednesday’s announcement.
Bank tax surcharge increase
UK banks have reported higher profits recently by charging elevated interest rates on loans. Bank executives widely expect the chancellor to target the sector, according to the BBC report.
Tax Policy Associates estimates that raising the corporation tax surcharge paid by banks from 3% to 5.5% could generate between £1bn and £2bn annually for the Treasury. Banks have warned that additional taxes might discourage investment in the UK and potentially reduce jobs, while ordinary savers with pension investments in bank shares could be indirectly affected. Some of the burden may also be passed to customers through lower savings rates or higher borrowing costs.
Electronic gaming machine levy
Former Prime Minister Gordon Brown has urged Healey to double the tax on electronic gaming machines found in betting shops and adult gaming centres, citing social harm from problem gambling.
The Social Market Foundation calculates that increasing the tax from 20% to 40% could raise between £275m and £460m, depending on behavioural responses. Research shows these machines are increasingly concentrated on Britain’s most deprived high streets, with one in four players gambling at risky or harmful levels. The industry counters that such measures could force betting shop closures and reduce contributions to horse racing.
VAT collection by online platforms
Reports suggest the chancellor will announce that major online marketplaces including Amazon, eBay and Temu must take responsibility for collecting VAT owed by retailers using their platforms.
The Treasury estimates it loses around £12bn yearly in VAT revenues. Part of this “VAT gap” stems from online sellers failing to charge VAT properly or not remitting collected VAT to the government. Enforcement proves difficult when overseas-based firms falsely present themselves as UK-established or close down only to reopen under different names.
Making platforms responsible for collection rather than individual retailers could raise approximately £1bn annually, according to reports. Amazon, which supports the measure, estimates £700m in additional VAT revenue. While some sellers might raise prices or leave platforms, the move would create fairer competition for compliant businesses.
Welfare spending cuts
The three tax measures combined would raise a maximum of roughly £3.5bn annually – relatively modest compared to the sums needed to restore headroom and fund new spending.
Prime Minister Andy Burnham stated over the summer he wanted a “fair and lasting” reduction to the welfare bill. Working health and sickness benefits have risen sharply since the Covid pandemic, with the Office for Budget Responsibility projecting costs will increase from £68bn this year to £81bn in 2031.
Keir Starmer and Rachel Reeves previously attempted to reduce spending on these benefits by £5bn yearly by 2030 but reversed course following a revolt by backbench Labour MPs. Independent experts say savings are possible but would likely require upfront investment to help people into work, potentially cancelling out near-term Treasury gains.
What this means for Poles in the UK
Polish workers and residents in Britain should monitor Wednesday’s Budget carefully, as several measures could directly affect household finances. If bank taxes increase, Poles with mortgages or personal loans may face slightly higher borrowing costs or lower savings rates, while those with workplace or private pensions invested in bank shares could see modest impacts on returns.
The VAT enforcement measure on online marketplaces may lead to price increases for some goods purchased through Amazon, eBay or Temu, though it should eliminate unfair competition from tax-evading sellers. Polish small business owners selling online will benefit from a level playing field where all competitors properly charge VAT.
Any welfare reforms warrant close attention, particularly for Poles receiving health-related or disability benefits. While the government has stepped back from previous cuts, future changes could affect eligibility or payment levels. Those currently claiming or considering claiming working-age benefits should keep informed about any announced changes and their implementation dates.
The Budget will be delivered on Wednesday and detailed documents will be available on gov.uk afterwards. Polish residents concerned about specific impacts on their circumstances should consult independent financial advisers or benefits specialists for personalised guidance.
