£40bn more in taxes needed to cut deficit

/, Politics/£40bn more in taxes needed to cut deficit

£40bn more in taxes needed to cut deficit

By Mark Fairlie

The Government will need to raise an additional £40bn a year in tax from consumers and businesses by 2025 if it wants to balance the books, according to the Institute for Fiscal Studies.

Spring Statement

The Chancellor, Phillip Hammond, delivered his Spring Statement on Tuesday 13th February stating that he felt “Tiggerish” about positive economic forecasts coming from the independent Office for Budget Responsibility. He said that there was “light at the end of the tunnel”, quoted the Independent.

During the Spring Statement, growth forecasts for this financial year were revised slightly upwards despite the forecasts for growth in 2019 and 2020 remaining unchanged. Inflation was forecast to drop from 3% to 2% and, at the same time, wage increases would start to grow quickly.

Hammond also predicted that government borrowing would fall year on year to 2021/22 and the crucial measure of debt to GDP would also decline from its current 85.6% to 78.3% over the same time period.

IFS not “Tiggerish”

The Institute for Fiscal Studies (IFS) is a London-based research-led thinktank analysis taxation and public policy in the UK.

The IFS is considered by many to be independent of political influence but by others as “the most striking example (of a taxpayer-funded institute) arguing for more expensive meddling by the State” (The Spectator).

Its director, Paul Johnson, speaking with BBC News, stated that “nothing much had changed” and that the UK’s growth outlook was the “worst in the G20”.

Mr Johnson stated that prisons and the health service were “struggling in a way that they were not two or three years ago” because the government was experiencing difficulties collecting enough tax to pay for them. Part of this problem has come from the rise in the number of self-employed company directors “who pay less tax than similarly remunerated employees”.

As reported in the Decrier, the IFS worried about an “exodus of high earners after Brexit (having) severe consequences for the Exchequer” and that the UK economy was “14% smaller” than it would have been because of the financial crash in 2008.

Resolution Foundation also pessimistic

£40bn more in taxes needed to cut deficit

The Resolution Foundation recently expressed many similar concerns to the IFS.

The foundation, set up to campaign for improved standards of living among low- and middle-income families, reported earlier this year that the gap between rich and poor had widened in the previous ten years.

Speaking to the Daily Mail, its director Torsten Bell, commented that although reducing debt and the shrinking deficit were “two major milestones on (Britain’s) long austerity journey”, he believes that the end of the squeeze is another decade away.

“At last! Tax cuts on the way”

Daily Express readers woke up on the 14th March to this headline in the Daily Express, however not everyone in the media shares their optimism.

The BBC’s Laura Kuenssberg, on Twitter, stated that “Not so surprising some in govt are talking about tax rises – that light at the end of the tunnel is pretty faint”.

Dharshini David, an independent city economist and formerly of Sky and BBC News, commented that

“so to balance the budget, maintain spending as % GDP & provide for health/social care/pension costs of ageing population, every adult in the UK will need to pay extra £800/yr in tax by 2025”

The Press Association quoted a Treasury spokesman “thanking the hard work of the British people” in helping the government to achieve “the first sustained fall in debt” since 2001.

By | 2018-03-15T12:44:32+00:00 March 15th, 2018|Personal Finance, Politics|0 Comments

About the Author:

mm
Journalist, Mark Farlie, provides cutting edge articles with a focus on plain English & zero jargon. With a breadth of interests, Mark writes on topics such as; personal finance, commercial finance, B2B, marketing, law and technology.

Leave A Comment