Tax rise fears despite Osborne cuts

George Osborne and Danny AlexanderThe Government could be forced to raise £6 billion in new taxes after the general election in 2015 despite Chancellor George Osborne's latest round of spending cuts, experts have warned.

The Institute for Fiscal Studies said that, despite the £11.5 billion worth of reductions for 2015/16 set out by Mr Osborne, savings of a similar magnitude had already been pencilled in for the following two years.
%VIRTUAL-SkimlinksPromo%IFS director Paul Johnson said there would have to be a "serious debate" on whether fiscal retrenchment on such a scale could be achieved through more spending cuts alone or whether taxes would have to rise as well.

He said ministers had previously said that 80% of the savings needed would come from spending cuts and from 20% tax cuts, but the measures set out in the spending review had shifted the balance to an 85/15 split. He said the public sector was already on course to have shed one million jobs by 2017-18 compared with 2010 when the Coalition came to power.
"At almost any other moment in the past 60 years, announcements of spending cuts of this scale would have created a storm," he said. "At some point we are going to have to have a serious debate about whether all the rest of the fiscal consolidation is really going to happen through spending cuts alone."

Katja Hall, chief policy director at the CBI, said an increasingly frustrated private sector needed to see urgent action to make good on capital spending pledges.

"This is the kind of bold, ambitious package which businesses have wanted for years - but the time for grand announcements is over," she said. "It's clear the coalition now sees it was wrong to cut capital spending so deeply in 2010. Long-term growth needs long-term investment - investing an extra £15 billion over the next parliament will go some way to redress the shortfall."

The Government had earlier unveiled a £100 billion investment programme in key infrastructure projects in an effort to kick-start economic growth. Roads, energy, homes and schools were among schemes detailed by Chief Secretary to the Treasury Danny Alexander.

He said the plans included the biggest public housing programme for 20 years, rail investment to rival the Victorians and the largest package of road building and improvements since the 1970s.

He said it was "ambitious long-term plan to build an infrastructure of which Britain can be proud" and showed the Government was putting "long-term priorities before short-term political pressures". But Labour dismissed the promises as "hot air" and said capital spending was actually going down in 2015/16.
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