RACHEL Reeves must make sure any major Budget tax rises are temporary for the hard-up, Sir Tony Blair’s institute warns.
The Chancellor should reverse increases after growth strengthens, the think-tank’s report insists.
Ms Reeves has fuelled expectations she could break election vows not to increase income tax, VAT or national insurance on November 26.
But the Tony Blair Institute said: “She should make clear it is temporary and conditional: a short-term measure to stabilise the public finances, not a permanent shift in direction.”
Once it delivers results, taxpayers must then be rewarded with “targeted tax cuts before the election”.
The Chancellor is looking to plug a financial black hole of up to £30billion and has indicated she wants to increase her £10billion headroom to better withstand shocks.
But the institute set up by the former PM adds any tax rises must be accompanied by reforms to help get business “back onside” following the increase to employer’s national insurance last year.
It points to rejecting the proposed protection against unfair dismissal for workers from day one in new employment legislation and instead suggests a six-month time frame.
The paper adds that business “wants a clear signal” prioritising enterprise, stability and delivery.
The TBI’s Tom Smith said: “The Chancellor acknowledges she has tough choices to make. She cannot satisfy the markets, the party, business and voters all at once.
“The only way to do so over time is to put Britain back on the path to growth — and that means a new bargain between Government and business.”
Meanwhile, the Confederation of British Industry insisted Ms Reeves should break Labour’s promises rather than clobber employers with more tax rises.
It said raising business taxes again risked stalling growth.
CBI boss Rain Newton-Smith said: “Sticking rigidly to manifesto commitments may be politically laudable but it’s only economically viable if material conditions remain unchanged.
“The fact is they are not. Tax rises and spending cuts are unpopular but the Chancellor faces little choice.
“We need to make sure that these measures are fair, broad-based and have a laser-like focus on raising investment, growth and productivity for the long-term.”
