PwC forecasts £10bn tax rise by 2008
Taxes may need to rise £10bn by 2008, according to economists at PricewaterhouseCoopers.
Its UK Economic Outlook report published this week calculated that the budget deficit will increase to around £30bn in 2003/4 compared to a Treasury forecast of £24bn.
The report blames slower GDP growth and weaker tax revenues on a slower recovery in corporate profits, notably in the financial sector following recent equity market weakness. Considering intended NHS spend, it believes the Treasury will need to raise taxes.
It envisages that GDP growth will average around 2.25% in 2003 and around 2.5% in 2004, compared to the Treasury pre-Budget forecasts of 2.5% to 3% and 3% to 3.5% respectively. The report also argues that tax revenues are likely to remain weaker relative to GDP than the Treasury expects, due to a slower recovery in corporate profits, notably in the financial sector following recent equity market weakness.