The UK will face tax rises of more than £40bn to plug holes in government finances and balance the books by 2025, a think tank has warned.
In its latest forecast, the Institute of Fiscal Studies (IFS) painted a depressing picture of the UK’s public finances, where poor productivity, earnings, and GDP growth had become the “new normal” since the 2008 financial crash.
In his Spring Statement on Tuesday, chancellor Philip Hammond said the UK had reached a “turning point” and upgraded UK GDP growth by 0.1% for 2018.
However, IFS director Paul Johnson contends that “nothing much” has changed and the UK’s growth outlook was “the worst in the G20”. After years of government imposed austerity, public services and prisons are starting to show signs of significant difficulties, and Johnson warned that an exodus of high earners after Brexit could have “severe” consequences for the exchequer.
He added that the UK economy was 14% smaller now that would have been predicted prior to the financial crash, and median earnings have remained unchanged for a decade.
According to the IFS, the gloomy outlook means that tax rises of £30bn would be needed to retain public spending and fulfil the Tory manifesto pledge of balancing the budget by 2025, and an extra £11bn would be required to cover social care, health and pension costs for the ageing population.