Thinktanks Urge Rachel Reeves to Reform UK Tax System

Published: 05 November 2025. The English Chronicle Desk. The English Chronicle Online.

A coalition of thinktanks from across the political spectrum is urging Chancellor Rachel Reeves to use her upcoming budget to overhaul what they describe as the “broken” UK tax system. The proposals, published this week, call for bold changes including abolishing stamp duty, merging income tax with national insurance, and simplifying tax rules to ensure that all income from work is taxed equally.

The group includes organisations from the right, such as the Adam Smith Institute, to the left, including the New Economics Foundation, and advocates for a package of “pro-growth reforms” designed to remove distortions that, they say, discourage work and investment while holding back productivity.

“The UK’s tax code is riddled with inconsistencies and distortions that discourage investment, penalise work and hold back productivity,” said Arun Advani, director of CenTax, which coordinated the report. “The upcoming budget is an opportunity for the chancellor to look at the tax system as a whole and ensure that whatever the total tax take, any changes are also serving her growth mission.”

Alongside these proposals, the National Institute of Economic and Social Research (NIESR) published a separate report on Wednesday urging Reeves to make “brave choices” in the November 26 budget. The institute called for extraordinary action, including a combination of spending cuts and tax rises worth £50bn, which could triple the size of her fiscal buffer.

The NIESR report warns that public debt remains a pressing concern. Five years after the pandemic, the trajectory of UK public debt is described as “unsustainable,” with analysts warning that without a credible plan to reduce debt over the current parliament, the UK risks permanently higher and potentially unstable debt levels. David Aikman, director of the NIESR, said: “This is the moment to reverse the drift and start bringing debt down. The government must act decisively to restore fiscal stability.”

Reeves herself has hinted at the possibility of raising the basic rate of income tax for the first time in fifty years. In a speech on Tuesday, she left the door open to such an increase, signaling that the government may consider a broader set of measures to raise revenue. The thinktank coalition emphasised that reforming the tax system should take priority in her budget, alongside any additional revenue-raising initiatives.

Among the coalition’s key recommendations are changes to council tax, suggesting rates should be recalculated based on the latest property values. They also propose lowering the headline rate of VAT while applying it more broadly across different types of spending. Other ideas include merging income tax and national insurance to remove arbitrary distinctions and simplify the system for both workers and employers.

The thinktanks argue that the current system is full of “arbitrary and nonsensical rules” that reduce efficiency and growth. The report stresses that reforms should focus on long-term productivity, helping businesses invest and expand while ensuring fairness in how individuals are taxed.

Meanwhile, Reeves faces a challenging fiscal environment. The independent Office for Budget Responsibility (OBR) is expected to revise down its estimate for trend productivity growth, potentially leaving the chancellor £20bn off course. She must also account for the £7bn cost of two high-profile policy reversals since the spring statement: changes to the winter fuel allowance and adjustments to welfare reforms.

In addition to these pressures, Reeves intends to increase the headroom against her fiscal rules. The NIESR report recommends building up to a £30bn buffer to provide flexibility and safeguard the government’s financial position. This buffer would help absorb unexpected shocks and ensure the government can meet its commitments without compromising fiscal discipline.

The institute’s analysis suggests that the chancellor is currently on track to miss her first fiscal rule, which requires that day-to-day spending be matched with tax receipts, by £38bn. This represents a slight improvement of £3bn compared to the August projection. Analysts forecast that the OBR’s updated figures may show a smaller deterioration of £10bn–£20bn, but even this would require a careful mix of spending cuts and tax rises to achieve a sustainable fiscal position.

Reeves’ challenge is further complicated by high inflation and interest rates, which are expected to ease only gradually. The thinktanks emphasise that addressing public debt and simplifying the tax system cannot be delayed. Urgent action, they argue, is essential to restore confidence in the UK economy and ensure long-term growth.

The coalition of thinktanks includes well-known organisations such as the Institute for Public Policy Research and the Joseph Rowntree Foundation, highlighting a rare consensus across the political spectrum on the need for reform. Their combined proposals aim not only to improve efficiency but also to create a tax system that is fair, transparent, and supportive of economic growth.

“The UK’s tax system is currently a barrier to productivity,” said Advani. “It punishes people for working and investing in ways that other countries do not. Reforming it would create a system that encourages effort, supports families, and strengthens the economy.”

Some of the proposals are likely to be controversial. Raising the basic rate of income tax, adjusting council tax, and implementing VAT changes will inevitably face scrutiny from opposition parties, businesses, and households. Yet the thinktanks argue that bold decisions are necessary to prevent the UK from drifting further into fiscal instability.

The government is expected to take several months to consider the proposals before the budget, engaging with stakeholders, economists, and policymakers to balance the competing demands of revenue generation, fairness, and economic growth. Analysts expect that the final package could include a mix of tax cuts, targeted spending reductions, and changes to existing levies to improve efficiency and stimulate growth.

Overall, the reports paint a clear picture: the UK tax system requires urgent reform, and the November budget represents a critical opportunity for Reeves to deliver meaningful change. By simplifying the code, merging taxes, and recalibrating rates, the government could create a more transparent, fair, and growth-oriented system.

Experts argue that such reforms could help reduce inefficiencies, encourage investment, and increase work incentives, ultimately boosting productivity and public confidence. They also stress that these changes should not simply be short-term fixes but part of a long-term strategy to modernise the UK’s fiscal framework and strengthen its economic foundations.

As the countdown to the November 26 budget continues, all eyes are on Reeves and her team. The decisions she makes will have a lasting impact on the UK economy, public finances, and the lives of millions of households. With clear guidance from thinktanks across the political spectrum, the chancellor has a roadmap for reform—but the challenge will lie in balancing ambition with pragmatism.