Resolution Foundation

What key steps can the Government take to overhaul car taxation in the upcoming budget?

The cost of living crisis has left British households with a legacy of higher prices – especially when it comes to energy bills.

@adamscorer.bsky.social from @nea.org.uk spoke to us about how families are struggling to cope.

Get the full conversation here ⤵️ buff.ly/epAqfRR

Figure 8 shows the impact of the economic and fiscal changes discussed so far on borrowing, where positive numbers in this chart indicate higher borrowing. The impact of the two big judgements from the OBR stand out clearly. In green is the £14 billion hit from lower trend productivity growth. While smaller than the £20 billion expected by some, reflecting the likely backloading of this judgement, this is still a very large hit to the public finances. Set against that, though, the impact of faster growth in wages in light blue is only slightly smaller, reducing borrowing by around £13 billion. Debt interest, given higher gilt yields and a slowing in Bank of England gilts sales, also pushes up on borrowing by £6 billion in 2029-30

Borrowing would be £14 billion higher in 2029-30 as a result of u-turns and changes in the economy forecast.

While smaller than the £20 billion expected by some, this is still a very large hit to the public finances.

This is not the time for half measures.

@Alex__Clegg explains why the Government should fully repeal the two child limit on benefits, as part of their upcoming Child Poverty Strategy ⤵️

Two crucial reforms the Budget could make are to motoring taxes, to boost the credibility of the UK’s public finances in both the medium and long-term. First, the Fuel Duty freeze should end. As Figure 14 shows, the real value of Fuel Duty has been cut by a third (23p per litre) over the past decade, and the cost of petrol is low by the standards of the past 20 years. Attempting to continue the freeze indefinitely would mean the Chancellor had chosen to commit £5 billion in 2029-30 to lowering Fuel Duty, and any such sums would be far better directed at cutting electricity bills and reducing poverty, as we set out earlier. Simply going ahead with existing plans would still leave real Fuel Duty levels lower than at any point through 1994 to 2021

Two crucial reforms the Budget could make are to motoring taxes.

Petrol and Fuel Duty are both historically cheap: permanently cancelling scheduled rises should not be a priority.

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Making unfair dismissal a ‘day one’ right would be a big change from the UK’s current two-year qualifying period.

The Government should keep but *reduce* ‘qualifying periods’ for unfair dismissal protection ⤵️ buff.ly/WepH7zY

Excellent analysis of Mayfield Review from @benbgeiger.bsky.social & @louisemurphy.bsky.social
@resolutionfoundation.org
- Review has the right diagnosis & analysis of problem & drivers.
- UK labour market isn't in crisis, but does have a long-running problem with disability inclusion.
1/n

Because our proposal also includes a 2p cut to National Insurance Contributions for employees, which would offset some of the revenue raise by the increase to Income Tax.

Employees would see not see any difference in their payslips.

Why should we switch 2p of tax from National Insurance to Income Tax? ⤵️

Income Tax raises more money and spreads the burden more fairly. The switch would raise £6 billion, and leave the vast majority of payslips unaffected.

📉 Calling all chart enthusiasts! 📢 The Resolution Foundation is hiring 👀

This is a rare opportunity to join our senior leadership team and take forward our work on productivity and growth.

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What would a 'tax switch' of 2p from National Insurance Contributions to Income Tax mean for tax rates on different income sources?

We've crunched the numbers.

Read Top of the Charts to find out more 👉 buff.ly/qOWKDYR

How can the Government help families with high energy bills?

Jonny Marshall explains why cutting VAT from bills would *not* be the best approach.

Catch up on the full discussion to find out how the Government can cut costs for three-in-four households ⤵️ buff.ly/aA5q2H3

If they don't implement significant policy changes, this Government will preside over the sharpest increase in child poverty by any Labour Government in the last 60 years ⤵️

Read 'No half measures' 👉 buff.ly/04eBps0

Ruth Curtice explains why tax rises are needed (tl;dw: to avoid more expensive borrowing).

This will need to be done carefully though, to avoid damaging growth, raising inflation or hitting households struggling most with the cost of living.

A key question for the Government is whether it would be better to rely more on a single big tax change. One large measure – particularly if it comes with an end to the Government’s manifesto commitment not to raise the main rates of Income Tax, National Insurance (NI), VAT or Corporation Tax, could help reassure markets and spread the burden across a wider base. But it may also do less to put the wider tax system on a reforming path. Indeed, getting the right policy in light of these tough circumstances should override considerations around the number of measures needed to get there. Meanwhile, politically at least, there may be arguments for the Government avoiding a long list of rows with particular groups. But the Labour Manifesto made it clear that this Government wants to avoid large tax rises on employees and that goal will have been made more relevant by the large rises in employer National Insurance at last year’s Autumn Budget

A deteriorating forecast means taxes are going up - but the Government must have a plan for this.

It is possible to raise significant sums through a series of smaller reforms. A range of measures are consistent with improving the tax system in three key areas.

Why should we switch 2p of tax from National Insurance to Income Tax? ⤵️

Income Tax raises more money and spreads the burden more fairly. The switch would raise £6 billion, and leave the vast majority of payslips unaffected.

The Government is reportedly considering switching 2p from National Insurance to Income Tax.

Here's why that would be a good idea ⤵️

What key steps can the Government take to overhaul car taxation in the upcoming budget?

Date and time: Thursday 13 November 2025 9:30 am - 10:45 am Speakers Emily Williams Director of Residential Research at Savills Paul Cheshire Emeritus Professor of Economic Geography at the LSE Jamie Carswell Director of Housing and Safer Communities at the Royal Borough of Greenwich Lindsay Judge Research Director at the Resolution Foundation Ruth Curtice Chief Executive of the Resolution Foundation (Chair)

🚨Event next week🚨

Successive governments have failed to grapple with Britain’s housing challenges, but can the Chancellor afford not to act decisively at this month's Budget?

🏠Register to join our discussion next Thursday⤵️

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quote from James Smith, Research Director at the Resolution FOundation: Budget-watchers are braced for a major downgrade to Britain’s productivity outlook. But ironically, a major upgrade to the outlook for pay could mean that the Chancellor’s fiscal black hole is less daunting than feared. However, reassuring the markets about the state of the public finances, paying for policy U-turns and providing fresh cost of living support won’t come cheap. Tax rises of £26 billion are likely to be needed. The Chancellor should look to make sensible tax reforms to car taxes, dividends and capital gains. Switching 2p of employee National Insurance onto Income Tax would raise £6 billion while protecting workers’ wages. Together, this will help to deliver a decisive Budget centred around prices, payslips and poverty reduction, and that shifts the focus away from black holes and back onto boosting growth.

The upcoming Budget is a make-or-break moment for the Government.

Read our preview of the key decisions facing the Chancellor now⤵️

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At our event yesterday, @MyStephanomics spoke about how the Government is doing better on the long-term stuff, than on the short-term.

Catch up here 👉 buff.ly/eC4gWG3

With Income Tax and National Insurance expected to bring in more than half a trillion pounds this year, small changes in the forecast for wages can matter a lot to the public finances. And while wage growth has been easing in recent months (falling from over 6 per cent at the end of last year to around 4.4 per cent in August on a whole-economy basis), it has been higher than expected back in March. In this context, the OBR’s Spring Statement forecast looks very weak, with wage growth falling back to 2 per cent by the end of next year, implying sharp falls in the share of national income going to workers. So, despite a bleaker outlook for productivity, which will reduce the amount firms can afford to pay their workers without suffering a fall in profitability, we expect the OBR to judge that its March forecast for wage growth was implausibly weak (Figure 6), and so raise it.

Good news for the Government could come in the form of a faster wage growth forecast.

Wage growth was extremely weak in March and could well be revised up despite the worse outlook for productivity.

Read our Budget preview now➡️ buff.ly/XPioKOp

Our latest anaylsis predicts a £14 billion deterioration in the public finances at the upcoming Budget ⤵️

Bank of England on hold at 4% on tight 5-4 vote with MPC minutes suggesting closer-than-expected decision. Big issue for today is outlook for inflation and new BoE comms. But this is also a key decision for the Chancellor ahead of the Budget. Thread on all that to follow...

📉 Calling all chart enthusiasts! 📢 The Resolution Foundation is hiring 👀

This is a rare opportunity to join our senior leadership team and take forward our work on productivity and growth.

Applications close in two weeks! ⤵️ buff.ly/x40DZV1

When it comes to necessary but politically contentious tax reforms, car taxes are high on the list. The Chancellor should take action in her upcoming Budget, but will need to get the details right…

Call of duties • Resolution Foundation Ahead of the Budget, this report considers the options for the Government to respond decisively to a deterioration in the public finances while also making the tax system fairer and more efficient.

The Chancellor should also consider linking VED to vehicle weight. For EVs, this would account for the extra harms caused by larger and heavier cars; while higher taxes on big ICE cars sold in future would help maintain incentives to go electric.

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Scrapping the VAT 'pavement tax' for public charging would cost only £300m in 2029 and for drivers without home chargers this could cancel out the majority of the rumoured per mile levy.

This level would keep home-charged EV driving cheap, particularly if the Chancellor also acts to cut electricity costs. But other measures will be needed to maintain EV momentum.

The rumoured 3p per mile charge would be smaller than the cost of Fuel Duty, and for typical mileage would be similar in scale to the EV VED reform announced by the previous Chancellor, Jeremy Hunt, back in November 2022 (now around £200 a year).