UK taxes may rise by £40bn, warns IFS

The Institute for Fiscal Studies (IFS) has suggested that taxes may have to increase by £40bn to deal with government borrowing.

In a report, the thinktank said: “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.”

Last week, Rishi Sunak said that it was the government’s responsibility to rebuild financed for future generations.

Paul Johnson, director of the IFS, responded to Sunak’s comments and said: “For now, with borrowing costs extremely low, Mr 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.

“Tax rises, and big ones, look all but inevitable, though likely not until the middle years of this decades,” he added.

“The majority of the economic costs associated with Brexit still lie ahead, and are likely to be felt quite quickly and sharply after the transition period ends. These effects will likely hit employment, as well as investment, the report said.”