Here are some fun ways Rachel Reeves [pictured pulling a face at her boss, prime minister Keir Starmer] could end austerity and fill that pesky budget black hole she insists the Tories left her – as described by Professor Simon Wren-Lewis of Mainly Macro, here.

He reckons that, compared to levels today, current public spending needs to rise by three per cent of Gross Domestic Product (GDP) – the total value of everything the UK makes every year – to return to 2010 levels of public service – but a better point of focus is the end point of [Office for Budget Responsibility] projections (2028-29), and because of the decline in spending Reeves has inherited the spending increase has to be more than four per cent of GDP by that date.

Raising public spending by one per cent of GDP in today’s prices will cost around £30 billion by the end of the decade, and after adding in inflation more than £33 billion.

Prof Wren-Lewis says:

The tax rises in Labour’s manifesto are small in comparison. VAT on private school fees, a higher windfall tax on energy, closing non-dom loopholes and ending the carried interest tax exemption raise about £4 billion. Labour also hopes to raise £6 billion by spending more on tax collection, but the OBR will need to make a judgement about how realistic that is.

So Reeves needs to find some pretty hefty tax increases and Prof Wren-Lewis has some ideas:

1. Employers National Insurance Contributions

Raising the contribution rate by 1% for employers would raise about £5 billion net… Another possibility is to extend national insurance payments to employers’ pension contributions, which could raise £12 billion (net of the public sector). Finally she could remove the NIC higher earnings cap, which could raise over £12 billion.

2. Capital Gains Tax (CGT)

At present, capital gains are taxed at a much lower rate than incomes, which if nothing else leads to a lot of tax avoidance… A recent study suggested that equalisation with income tax (with rates of 20%, 40% and 45%) plus a system of allowances and other changes could raise £14 billion. Leaks to the Guardian suggest Reeves is looking at increases in the CGT rate from 20% (for most) to between 33% to 39%.

3. Investment income

Reeves could raise the tax rate on rental and dividend income. These are currently taxed at similar rates to earned income, but they could be taxed at higher rates. More radically, she could extend National Insurance Contributions to investment income, which Advani estimates could raise £11 billion.

4. Inheritance tax

Raising this from 40% to 45% would only raise a billion according to the IFS ready reckoner. (I would advocate a much bigger rise – sorry kids! – on equity grounds.) There is probably more scope to raise money by removing various exemptions (e.g. business and agricultural reliefs are worth 2 billion), and Reeves could be more radical still and replace it with a gifts tax. I don’t expect it, but Reeves could also introduce a wealth tax. Advani suggests a 1% annual tax would raise £13 billion.

5. Extending the freeze on tax thresholds

These are currently frozen until April 2028. Reeves could extend these over the full OBR forecast period, raising around £8 billion, but this really is an income tax increase. Budget leaks suggest she intends to do this, and perhaps she thinks this is politically safe as the Conservatives will find it difficult to condemn her for continuing what they started.

But the key question isn’t how Reeves raises taxes but what she intends to do with the leeway this will give here.

At the moment, net public investment is set to fall from 2.5 per cent of GDP to 1.7 per cent by 2028-29. Prof Wren-Lewis reckons this decline needs to be turned into a substantial rise if we are to catch up with all the investment lost under the Conservatives.

Will Reeves take any of the “tough decisions” (where have we heard those words before?) needed to reverse the decline in public investment and therefore put an end to Tory austerity?

Or will she just make the easy choices and say they were “tough decisions”?

This Writer reckons we can all predict the answer now but I look forward to your observations.

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