Economic think tank offers grim forecast for UK tax

British Pound

The National Institute of Economic and Social Research (Nieser) has claimed that a decade of rising taxes may be the only way for the United Kingdom to reduce its borrowing deficit.

A report published by the leading think tank says that for the deficit to see a 3 percent cut by 2020, the basic rate of income tax must rise to an equivalent of 6p.

It is thought that the tax rise would not have to be in the form of income tax, however Nieser said that any sort rise brought in to achieve the 2020 deficit reduction would be the equivalent of raising income tax up to 26p from 20p.

BBC man Nils Blythe said: “Only with that type of increase will the national debt eventually fall below the 40 percent of national income regarded as a prudent level”.

In more bleak foreshadowing the Nieser report also predicted that by 2011 UK unemployment levels will have risen up to 2.7 million, compared to today’s figure of 2.5 million.

Also, in contrast to the UK Governments own forecasting in this year’s Budget, the report claims that the UK economy will experience only a slight growth of 1 percent in 2010, and 2.25 percent in 2011. March’s Budget made predictions of 1 percent growth this year and 3-3.5% in 2011.

Nieser attribute necessary public spending cuts to this decreased growth projection, on the upside consumer spending is predicted to rise, but by a paltry 0.3 percent.

Away from the UK the think tank is a bit more optimistic, it expects the world economy to grow by 4 percent in 2010, fuelled by the march of developing economies such as China, a country that has seen GDP growth going in to double figures in the last year.