The IFS urges Rishi Sunak to hold his ground for now but warns big tax rises must come if a new era of austerity is to be avoided.
Taxes may have to rise by £40bn - just to prevent government borrowing "spiralling upwards", according to the Institute for Fiscal Studies (IFS).
The think-tank's so-called green budget, a survey of the UK economy and public finances, warns that weaker tax revenues as a result of the COVID-19 crisis will combine with record levels of peacetime borrowing to place a huge strain on the Treasury in the years ahead.
The IFS study pointed to a central scenario that the public purse faced a revenue shortfall of at least £100bn in four years' time because the economy is on course to be 5% smaller than its pre-crisis level.
"Even a government content to keep debt constant at 100% of national income, and borrowing at around £80bn a year, would, under our central scenario, require a fiscal tightening (tax rise and/or spending cuts) worth around 2% of national income in 2024 - over £40bn in today's terms," the report said.
The figures, the IFS cautioned, did not account for any additional spending likely to still be needed at that time that would ramp up pressure to borrow.Advertisement
The report warned that now was not the time for the chancellor, who has already called off his autumn budget, to be considering tax increases given the extent of the damage to employment and wider Treasury income.
Rishi Sunak said last week that the government had a "sacred responsibility" to future generations to rebuild the public finances.
Latest Stories
-
We have a stable national grid; outages due to localised faults – ECG
42 mins -
Easter celebration: Ghana AIDS Commission to distribute free condoms in Kwahu
56 mins -
Zeepay secures additional $3m from Verdant Capital Hybrid Fund
1 hour -
Over 70% of power outages were due to planned maintenance works – ECG to PURC
1 hour -
Access Bank partners Horseman Shoes to boost local shoe manufacturing industry
1 hour -
Election 2024: Don’t vote for candidates making empty promises – CDD to Ghanaians
1 hour -
IGP shares Easter safety tips on Adom FM’s ‘Ofie Kwanso’
2 hours -
Ebo Whyte offers fully-funded trip as he unveils new play ‘Dubai or No Sex’
2 hours -
Ancient culture of Anlo Kingdom: Exploring “Torkor Atorlia,” the fifth landing stage’s old ways of punishment
2 hours -
Leaders from Saudi Arabia, Turkey, Botswana, Cameroon and Sierra Leone to lead discussions at Africa Finance Corporation’s (AFC) 4th Country & Stakeholder Symposium
3 hours -
Network International Delivers Strong 2023 Revenue growth at 15% y/y and free cashflow growth of 16% y/y
3 hours -
President Akufo-Addo extends Easter Greetings to Ghanaians, urges safe drive
3 hours -
Government pushes for use of more local materials in housing, other infrastructure projects
3 hours -
Dr Bawumia extends Easter greetings to Christians
4 hours -
CAF Confederation Cup: ‘Ghanaians should expect victory against Stade Malien’ – Dreams FC forward Ishmael Dede
4 hours