Government needs to raise income tax by 5%

A rise in income tax of as much as 5% or cuts of ?20bn in public spending
will be needed within three years to counter the financial turmoil and avoid
driving the government’s finances deeper into the red, a leading think-tank has

The National Institute of
Economic and Social Research
issued the stark message to Gordon Brown and
Alistair Darling yesterday. Along with other experts, it believes the weakness
of tax receipts and higher benefit bills, as a result of tumbling share prices,
plummeting house prices and the severe squeeze on consumer spending, will send
government borrowing soaring, The Times reports.

The think-tank said the high level of government borrowing in combination
will a sharper fall into the red by Treasury in the coming years of weak growth
would force spending cuts or tax rises by 2011 at the latest.

Further reading:

The Times story

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