Economists at the IFS are warning Labour and the Conservatives to avoid "bad policy" tax locks

Mark Sands
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The UK will head to the polls on 8 June. (Source: Getty)

Prime Minister Theresa May and Labour leader Jeremy Corbyn have been warned against new "tax lock" promises by highly-respected think tank the Institute for Fiscal Studies.

In 2015, the Conservatives vowed not to raise VAT, income tax or national insurance contributions, but May has stopped short of promising to do the same ahead of the 8 June election, suggesting only that VAT may be capped.

And with both Labour and the Tories expected to publish their plans within a fortnight, the IFS has warned politicians against committing to hold the key taxes.

Read More: Hammond hints Britain could lower corporate tax rate

Income tax, VAT and national insurance contributions make up almost two-thirds of tax revenues, and the IFS warned that any promise could also prevent "desirable" tax reforms. The IFS was one of few groups to welcome changes put forward by chancellor Philip Hammond during his Spring Budget, which increased national insurance bills for the self-employed to reflect changes to the state pension.

Labour has also ruled out increasing VAT, but Corbyn has indicated that he would like to see higher taxes on the rich. Labour has yet to state whether they will rule our increases in NICs.

IFS associate director Helen Miller said: "Regardless of whether a party wants to raise or cut taxes overall, the tax lock is bad policy and should not be repeated in any of the upcoming manifestos.

"Constraining the workhorse taxes in this way prevents desirable tax reforms, as we have seen in relation to the taxation of the self-employed, and restricts the policy levers available to deal with any unexpected change in the economy.”

The Conservatives are expected to publish a manifesto early next week, with Labour expected to follow suit in mid-May.

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