UK Budget deficit may push up taxes
Tax rises may be on the cards after a higher-than-expected budget deficit led to a sharp increase in public sector net borrowing.
A drastic fall of 5.2% in corporation tax receipts was among the reasons behind a ballooning £6.7bn public borrowing requirement in the year to August, up from £500m in the same period the year before.
PwC economist John Harksworth said the figures implied a full-year budget deficit of £16bn, way above the Treasury’s £11bn forecast. A growing budget deficit could lead to higher taxes, said Royal Bank of Scotland economist Geoffrey Dicks.
Treasury assumptions of 2 to 2.5% growth this year and 3 to 3.5% in 2003 compare unfavourably to recent independent forecasts of 1.5% this year and 2.5% next year.