IFS warns of need for tax rises
The Institute of Fiscal Studies says the Treasury will be forced to raise taxes to fill the 'black hole' in public finances as a result of the deterioration of the stock market.
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Today, the benchmark FTSE-100 index had fallen by more than 100 points, the 11th straight session it has dropped in value, fuelled by fears of the US going to war against Iraq and matching similar slumps on Wall Street.
According to the IFS, the chancellor’s projections for government borrowing – £20bn in the current tax year, and £24bn in 2003/2004 – were based on the stock market rising, but the 9% drop in value over the last week and a half means these borrowing rules cannot be met without raising taxes.
In its Green Budget to be released this week, the IFS will warn that the Treasury has been too optimistic in its tax revenue projections, although it does not believe Brown will announce tax increases in the next Budget.