UK Budget deficit may push up taxes

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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.

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