Tax rises of £40bn 'needed by mid-2020s' to cut deficit

From BBC - March 14, 2018

Annual tax rises of 40bn will be needed if the government wants to keep spending constant and balance its books by 2025, a think tank has warned.

The Institute for Fiscal Studies added that dismal productivity, earnings and GDP growth had become the "new normal".

Its forecast comes after the chancellor unveiled upgraded growth and borrowing forecasts in the Spring Statement on Tuesday.

Philip Hammond said the UK economy had reached a turning point.

Paul Johnson, director of the Institute for Fiscal Studies (IFS), said that "nothing much" had changed in the Spring Statement.

He said the UK was still suffering the hangover of the 2008 financial crisis and its growth outlook was "the worst in the G20".

He said the big problem facing the chancellor was how to balance growing demands for spending increases with his promise to eliminate the deficit by the mid-2020s.

Tax challenge

On the one hand, public services such as prisons and the NHS were struggling "in a way that they were not two or three years ago", Mr Johnson said.

On the other, the government is struggling to collect as much tax as it used to, after taking large numbers of people out of paying income tax.

"[The chancellor] has been unable to tackle the problems posed by the increasing numbers of self-employed and company owner managers, who pay less tax than similarly remunerated," Mr Johnson added.

Higher growth?


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