IFS budget prediction adds weight to calls for tax cuts

Produced in conjunction with investment bank Goldman Sachs, the IFS budget report said Brown would have to give away £2bn in the budget just to hold the tax burden steady and £3bn to put it on a downward trend.

Brown is already sensitive to Conservative charges that taxes have gone up under Labour and the institute and Goldman Sachs said the government would have to use some of it’s bulging war chest to offset fiscal drag -whereby rising incomes push people into higher tax brackets and increase state revenues.

The report also predicted that the government was in the enviable position of being able both to cut taxes and respond to demands for higher public spending from its core supporters.

Substantial changes to the structure of national insurance contributions have moved towards integration with income tax. Closing the gap between the upper earnings limit for employee NICs and the starting point for higher rate income tax would raise £600m, the report said.

The IFS predicts the budget will also contain a range of measures intended to benefit smaller companies, including substantial tax reliefs for share options, reductions in capital gains tax on business assets, and a new research and development tax credit restricted to smaller firms.

The IFS Green Budget 2000

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