Government will have to raise taxes to meet its fiscal targets

The National Institute of Economic and Social Research (NIESR) has warned that the next government will have no spending room for tax giveaways and will have to find ways of generating revenues amid “sluggish” growth. It said that ministers will have to implement tax rises and delay net zero investment unless the government is willing to revise the Treasury’s fiscal rules, saying that weak growth and lower inflation would make it difficult to adhere to the current policy. The think-tank argued that the current fiscal rules would prevent any pre-election tax cuts and that debt would continue to rise as a percentage of national income. Analysis suggests that weak growth will cause the debt-to-GDP ratio, which is approaching 100%, to rise over the next five years, breaching the Chancellor’s current fiscal rules. The think-tank predicts that the economy will grow by 0.4% in Q1 and by 0.8% across 2024 as a whole. It also forecasts that average wage growth will fall back to about 3% in 2025, from the current rate of above 6%.

The Times

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