Newspaper article The Evening Standard (London, England)

'Fiddling' Chancellor May Have to Raise Taxes, Say Experts; Osborne 'Has Broken Two of His Three Fiscal Rules'

Newspaper article The Evening Standard (London, England)

'Fiddling' Chancellor May Have to Raise Taxes, Say Experts; Osborne 'Has Broken Two of His Three Fiscal Rules'

Article excerpt

Byline: Nicholas Cecil Deputy Political Editor

GEORGE OSBORNE will have to impose "proper" tax rises or even more painful spending cuts if the UK economy takes another turn for the worse, experts warned today.

Economists at the highly respected Institute for Fiscal Studies also said that the Chancellor was only on course to meet his flagship target of a Budget surplus by 2019/20 after "games playing" and "fiddling around".

Tax revenues had been "shifted" into that year while capital spending had been moved out. Even so, the Office for Budget Responsibility said the likelihood of Mr Osborne achieving his aim was roughly 50/50 after GDP forecasts were dramatically downgraded yesterday. IFS director Paul Johnson warned that the Chancellor was unlikely to be able to repeat his "shuffling" around of the figures again to meet the surplus target -- one of three self-imposed fiscal rules.

Mr Johnson said that if the economic outlook gets darker: "I think he will be forced to put some proper tax increases in or possibly even to find some yet further proper spending cuts."

The Government faces having to fill a PS56 billion black hole over five Continued on Page 2 Continued from Page 1 years -- a stark contrast to forecasts made only months ago. Mr Johnson said that the 2019/20 picture could deteriorate on an even larger scale within the next year.

"It must be something, that if I were the Chancellor, would be keeping me awake at night now," he added.

Mr Osborne has already broken two of his three fiscal rules, on the welfare cap and reducing debt as a share of national income.

The IFS explained that the Chancellor was changing his behaviour to make sure he meets the target for a surplus in 2019/20 -- currently estimated to be just over PS10 billion -- but this might not produce the most "economically optimal" actions. …

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