Brits warned of tax rises whoever wins the overall election on 4 July
Brits have been warned they could be hammered with tax rises after 4 July whoever wins the general election.
The Institute for Fiscal Studies hit out at a ‘conspiracy of silence’ among the UK’s political parties over the need for tax hikes, spending cuts, or increased borrowing.
The think tank said soaring debt interest payments, a growth in welfare spending, and sluggish economic growth were part of a ‘toxic mix’ for the public finances.
IFS director Paul Johnson claimed the choice between tax rises, cuts or larger debt was a ‘trilemma’ facing whichever party wins power in 10 days’ time.
He said the Labour and Tory manifestos offered no clue as to the choice party leaders Rishi Sunak or Sir Keir Starmer might make.
Mr Johnson also attacked Reform UK and the Green Party for helping to ‘poison the political debate’ with ‘wholly unattainable’ tax and spending plans.
IFS director Paul Johnson claimed a choice between tax rises, cuts or larger debt was a ‘trilemma’ facing whichever party wins power in 10 days’ time
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Speaking at a manifesto analysis briefing in Westminster this morning, Mr Johnson said taxes are at the ‘highest level ever’ in the UK yet public services are struggling.
‘Despite the high tax levels, spending on many public services will, on current plans, likely need to be cut over the next five years unless taxes are raised further or government debt raises ever upwards,’ he added.
On how such a situation has emerged, Mr Johnson said: ‘The answer is in large part a £50billion increase in debt interest spending relative to forecasts, and a pretty big growth in the welfare budget over the last few years.
‘We’ve also got rising health spending, a defence budget which for the first time in decades is going to grow not shrink, and the reality of demographic change and the need to transition to net zero.
‘Add in low growth and the after-effects of the pandemic and the energy price crisis and you’ve got a pretty toxic mix for the public finances.
‘The two manifestos of the main parties essentially ignore these big challenges, these big facts mean that huge decisions over the size and shape of the state will need to be taken, that those decisions will, in all likelihood, mean higher taxes or worse public services.’
Mr Johnson said primary surpluses would be needed to stop debt spiralling upwards, explaining: ‘That means the government needs to collect more in tax and other revenues than it spends on everything apart from that debt interest bill.
‘That’s not necessarily a recipe for a happy electorate. We’re taking more away than you’re giving back.’
The Institute for Fiscal Studies hit out at a ‘conspiracy of silence’ among the UK’s political parties over the need for tax hikes, spending cuts, or increased borrowing
The think tank said soaring debt interest payments, a growth in welfare spending, and sluggish economic growth were part of a ‘toxic mix’ for the public finances
Mr Johnson said both Labour and the Conservatives are committed to ensuring that debt is falling in five years time, adding it ‘really constrains’ them.
He said: ‘Taking it seriously, and as far as one can tell both manifestos do take it seriously, will mean the painful choices we’re outlining, none of that are faced up to.
‘Current plans in the budget are for big cuts in investment spending – £18 billion a year or so by 2030.’
Mr Johnson went on: ‘We’ve called this a conspiracy of silence and that has been essentially maintained.
‘Regardless of who takes office following the general election, they will – they might get lucky, but unless they get lucky – soon face a stark choice: raise taxes by more than they have told us in their manifesto or implement cuts to some areas of spending or break their fiscal rules and allow debt to rise for longer.
‘That is the trilemma. What will they choose? I don’t know, the manifestos do not give us a clue.’
Mr Johnson said proposals by Labour and the Tories not to increase specific taxes or tax rates – known as tax locks – are a ‘mistake’.
He said: ‘They will constrain policy if a future government does decide it wants to raise more money to fund public services. They will also put constraints on tax reform.’
Turning to other parties, Mr Johnson said Reform UK and the Greens offer ‘much bigger number, very exciting radical policies’.
He said: ‘Of course they’re not going to be implemented because they’re not going to form the government.
‘But I would suggest the way they suggest that their radical reforms can realistically make a positive difference, when in fact what they propose is wholly unattainable, does help to poison the political debate.
‘It makes the other parties look feeble when you say “we could do all this stuff”. They can’t.’
