According to Reuters, the Institute for Fiscal Studies (IFS) is warning that higher taxes will be necessary to meet PM May’s goals of ending the austerity squeeze on public services.
The Institute for Fiscal Studies (IFS) said higher taxes need not hurt the economy but May’s fragile hold on power, as she attempts to navigate Brexit, made significant increases unlikely in the Oct. 29 budget statement. Instead, efforts to lighten Britain’s debt burden were the likeliest casualty of May’s promise to end austerity, potentially leaving the country vulnerable when the next economic crisis hits.
Weak economic growth made deficit reduction much slower than the Conservatives expected when they took office in 2010. At 1.9 percent of gross domestic product, the budget deficit last year was the lowest since the 2001/02 financial year. But public debt more than doubled as a share of GDP after the financial crisis to above 80 percent, and has only recently started to fall. May did not specify what she meant when she told her Conservative Party’s annual conference that austerity “is over” on Oct. 3.
The non-partisan IFS said even a narrow interpretation of no more real-terms cuts for public services but a continued welfare squeeze would leave a 19 billion-pound hole in Hammond’s budget plans.
Filling the hole via tax rises would need tax as a share of GDP to rise by 1 percentage point to 35 percent of GDP.