The Institute for Fiscal Studies (IFS) has cautioned against tax cuts in the upcoming budget unless the government can provide details of how they will be paid for. Although the chancellor, Rishi Sunak, has indicated his desire to lower taxes, the IFS has argued that this an inappropriate time for such reductions. The organisation’s report indicates that the government should wait until a detailed spending review can be completed before acting on any proposals. Any tax cuts achieved through uncertain spending cuts might never eventuate, according to IFS deputy director Carl Emmerson.
While tax revenue rises in the UK are approaching record high levels relative to the size of the economy, government debt is rising and barely on course to fall within the next five years. This suggests that there is a weak economic case for further significant net tax cuts in the upcoming budget, the report claims. Any such cuts that are implemented should be changes to stamp duty on share and property purchases rather than reductions in income tax or a further decrease in national insurance rates.
The report also indicated that unprotected areas such as justice and local government may come under greater financial pressure, with local councils already experiencing financial difficulties due to shrinking budgets. According to the IFS, further cuts would result in a need to find an additional £25bn to maintain spending at current levels.
The IFS has previously called the government’s post-election spending plans “a work of fiction”. The International Monetary Fund has also warned against further tax cuts in the UK, highlighting the need for greater fiscal stimulus. The budget could be the last chance for the government to make significant policy changes before a general election earmarked for January 2022
Read the full article from The BBC here: Read More