No new tax rises in Spring Statement, but don't be fooled - they are still set to rise

The chancellor's Spring Statement gave us one less thing to worry about: no new tax rises from Rachel Reeves today.

But don't be fooled - taxes are still set to rise.

For there are measures, announced ahead of today, yet to take effect.

Most significant is fiscal drag, where the thresholds that apply to different rates of tax on income are frozen.

In the last Budget, that was extended until 2031, pulling more money out of incomes and into the tax office coffers than otherwise. In revenue-raising terms, that move was more than equivalent to a penny on the basic rate of income tax.

Tuesday's forecasts show that the tax burden - the proportion of the nation's income going to the government - is set to rise further to a historic high of 38% by 2031.

And there could be more hikes in store. These forecasts were completed last week, just before an attack on Iran began and energy prices soared.

It is highly uncertain how long the volatility in energy prices will last. But if sustained, economists are already speculating that the chancellor will, at the least, struggle to end the freeze on fuel duty come the next Budget.

Add in the risks of higher inflation, interest rates and a possible dent to growth and she could risk breaching her self-imposed financial rules. This is her pledge to only borrow to invest and not to cover day-to-day spending costs.

Even if there isn't a major energy price shock, there are more reasons why there could be further tax rises over the rest of this parliament.

As the government's official forecaster, the Office for Budget Responsibility (OBR), flags, there are other risks this year - pressures on defence and health spending, for example.

The OBR is paid to be cautious. But it means that, come the autumn Budget, there could still be a need for tax or spending changes - if the sums on the public finances are to add up.

Beyond that, there's the spending plans the chancellor has pencilled in for future years. The rate of growth of public spending slows down in a few years' time. Take account of population growth and inflation and some departments' budgets may be squeezed.

Pencilling in perhaps unrealistic future spending plans is a ploy many chancellors have used to make numbers add up. In reality, there will be pressure to increase this spending, especially just ahead of an election - and that may spell tax rises too.

And then there is something we don't talk much about - productivity.

Some public services, including the NHS and the law courts remain less efficient than prior to the pandemic.

Some areas are turning the corner, but some analysts fear the government's assumptions about improvements may be ambitious. If so, several billion pounds more will need to be found by the next election, just to maintain services.

Is there a get out of jail free card? The ideal scenario would be faster growth, which brings in more tax money. But, as the chancellor acknowledged, there is more to do to boost our prospects.

With this statement, the chancellor intended to show that she has achieved sound public finances, providing a stable backdrop with which to face an uncertain world. But there is much still to keep her, and taxpayers, on their toes.