LONDON (MNI) – Chancellor George Osborne will fail to meet his
target of closing the UK budget deficit by 2015-16 unless he raises
taxes still further, the respected economic think-tank the National
Institute of Economic and Social Research.
“The NIESR forecast of government revenues, published on the same
day as the CSR suggests that there will be a shortfall of 1% of
GDP in revenue (stg18 billion in 2015 cash terms),” NIESR said.
“The Office for Budget Responsibility (OBR) expect housing-related
revenues will achieve robust growth, with real house prices increasing
by 2% a year and turnover increasing. NIESR believe real house prices
are still too high,” NIESR added.
The next opportunity for Osborne to increase taxes is the next
annual budget, due in Spring 2011. Prime Minister David Cameron has
previously said he favours closing the deficit with a spending cut/tax
hike ratio of 80:20.
“If you look internationally at when countries have had to deal
with horrendous budget deficits, like the one that we were left by
Labour, the international evidence shows that the 80:20 split is about
the right proportion. That is if you like the gold standard that has
been set internationally,” he told reporters at the time of the June
Budget.
Commentators have already warned that Osborne’s decision to dilute
his plan to cut near 25% from unprotected government departments’
spending has injected a high degree of uncertainty into his
deficit-cutting plans. The Spending Review published Wednesday makes his
plan much more dependent on cuts in welfare spending, which by
definition is highly cyclical.
–London newsroom: 4420 7862 7492; email: wwilkes@marketnews.com
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