A LEADING think-tank has warned it would be “unwise” for any political party to tie their hands by ruling out rises in income tax, National Insurance contributions (NICs) and VAT during the next parliament.

The Institute for Fiscal Studies (IFS) said the three together contributed almost two-thirds of tax revenues and committing not to raise them would be a serious constraint on the ability of the next government to raise additional revenues.

This would also prevent “desirable” tax reforms, notably in relation to the taxation of the self-employed, and restrict the available policy levers for dealing with any unexpected change in the economy, the think-tank said, adding that the move could possible lead to “poor policy choices” should a government be forced to rely heavily on smaller taxes.

“On Sunday, Theresa May ruled out an increase in VAT,” said the IFS.

“Even if the Conservatives do not intend to increase the overall burden of taxation, they would be sensible to maintain flexibility and not rule out increases in income tax or NICs.

“Labour has also ruled out an increase in VAT and Jeremy Corbyn has indicated that he would like to see higher taxes on the rich.

“Labour have yet to state whether they will rule out increases in NICs. Any government that rules out NICs rises will be unable to directly tackle the public finance hole created by growing self-employment.”

In a pre-election briefing note published yesterday, the IFS said that by 2019-20, the share of national income raised in taxes is set to reach its highest level since the early 1980s, at 34 per cent.

“Income tax, NICs and VAT will continue to be the workhorse taxes, but there have been important changes in the composition of revenues since 2010,” said the IFS.

“For example, income tax is due to raise a lower share of total taxes and be more reliant on the top one per cent of taxpayers.

“The taxman is set to raise less from fuel duty and from corporation tax than now.

“Revenues are now more reliant on smaller taxes. This, in part, results from the Conservatives’ tax lock and has in general not reflected good policy making.

“Changes have tended to be ad hoc and designed to fill budgetary holes rather than as part of a long-term strategy for tax.”

The briefing note added: “The next government, whatever its colour, will have to deal with the growth in self-employment (which is reducing tax receipts) and the move towards more fuel-efficient vehicles which, alongside the recent unwillingness to raise fuel duty even in line with inflation, is forecast to cost substantial sums.

“Either taxes on the self-employed and drivers will have to rise, or other taxes will need to rise to plug the gap.”

The IFS said its previous research showed it was also common practice to raise taxes following an election.

“In the 12 months following the five General Elections of 1992, 1997, 2001, 2005 and 2010 significant tax raising measures were announced (despite these measures typically not featuring in the winning party’s General Election manifesto),” it said.

“Across these elections the average net tax rise in the 12 months following the election was £7.5 billion.

“The 2015 General Election followed this trend: the net impact of announcements made in the 12 months following the election boosted revenues by an estimated £3.5bn.”

This was true, it said, despite a £5bn giveaway from increasing the personal allowance and the higher rate tax threshold.

IFS associate director Helen Miller, who co-authored the report, 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.”