UK Facing Massive Tax Hikes Following COVID Spending Spree, Warns Think Tank, As Unemployment Rises
The British government may need to increase taxes by over £40 billion per year in order to prevent the debt accrued during the China virus lockdowns from “spiralling upwards”, the Institute for Fiscal Studies (IFS) warned in a report.
The think tank’s report suggested that a decrease in tax revenue combined with record peacetime spending will force the government to either decrease spending — an unlikely proposition — or increase taxes, in a move that would fly in the face of the 2019 Conservative Party manifesto.
The IFS forecast that the deficit will reach £350 billion this year, representing 17 per cent of British GDP and more than six times initially projected in the March budget.
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“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 report noted, however, that these figures are based on the current level of spending, meaning that if the government spends more to prop up industries hit by further lockdown, such as the hospitality sector, then taxes may need to be raised further.
IFS director Paul Johnson said that the money being spent to prop up the economy is necessary to prevent economic collapse. He said that as a result of low-interest rates, Chancellor of the Exchequer Rishi Sunak “shouldn’t worry unduly about the debt being accrued as a result. It is necessary.”
“Unfortunately, none of this will be enough fully to protect the economy into the medium run. Without action, debt — already at its highest level in more than half a century — would carry on rising,” he warned.
“Tax rises, and big ones, look all but inevitable, though likely not until the middle years of this decade,” Johnson added.
The report also found that the economic damage during the first half of 2020 caused by the China virus was ubiquitous, with GDP falling in the U.S. and Germany by 11.5 per cent and 14.3 per cent in the European Union as a whole. Yet the sharpest declines in major economies were seen in Spain and the United Kingdom which saw 22.7 and 22.1 per cent falls in GDP respectively.
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The prospect of massive tax hikes comes as the unemployment rate in the United Kingdom reached its highest level in three years.
In the three months to August, the unemployment rate rose to 4.5 per cent compared to 4.1 in the previous quarter. During the same time, redundancies rose by a record 114,000, reaching the highest level since 2009 during the last economic crisis.
https://www.breitbart.com/europe/2020/10/13/uk-facing-massive-tax-hikes-following-covid-spending-spree-warns-think-tank/