Income tax 'must rise by 6p'

Thinktank says income tax must rise by 6p
Thinktank says income tax must rise by 6p

By Sasjkia Otto

Income tax must be raised six per cent to protect Britain from the next financial crisis, according to a report released today by a leading think tank that advises the Treasury.

The National Institute of Economic and Social Research (NIESR) said Britain would need to raise taxes gradually to cut Britain's deficit to avoid being vulnerable to the next financial crisis.

It said all three parties' current plans for spending cuts, which were as deep as any since the 1970s, were not ambitious enough.


Ray Barrell, director of macroeconomics at NIESR, told the Daily Telegraph more drastic action was needed to protect Britain from "future crisis or war".

"The crisis has made us four per cent poorer. It means we have to assume there is a problem with our spending plans. Increasing debt means we are borrowing from our children and our grandchildren. We need more spending cuts and higher taxes to bring the deficit down," he said.

However, Martin Weale, director of NIESR, warned cuts in spending and tax rises should be delayed as early cuts would hurt the economy and national income growth.

"At least 30,000 jobs would go and possibly 60,000 and that would cut consumer spending further and GDP would decline by 0.1%," he told the Guardian.

He also warned against increasing VAT, which he said would increase inflation. He believed a future government would find it more difficult to cut taxes than expected and would have to turn to tax rises.

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