Yesterday, the National Institute for Economic and Social Research said tax rises were likely even as it revised its economic growth predictions upwards.
The NIESR said it expected net borrowing would reach £40bn by 2005/2006, compared with the Treasury’s forecast of £23bn and said the government’s expectations for tax receipts was ‘too optimistic’.
This view echoes similar predictions made by the ITEM Club yesterday which said the government would have to raise about £10bn in tax revenues to finance unrealistic growth expectations, meaning an extra £170 per head.
The ITEM Club expects growth in 2004 to be between 2% and 2.5%, while the NIESR expects the economy to grow by 2.8%, up from an earlier prediction of 2.4%.
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