IFS warns that tax rises in the next five years could be inevitable 

Economy News

A think tank has criticised the UK’s major political parties for avoiding tough decisions about public finances in their manifestos, predicting a likely increase in taxes over the next five years. 

The Institute for Fiscal Studies (IFS) accused both Labour and the Conservatives of ignoring the “painful choices” necessary to address the country’s financial issues.

The IFS went on to say that the UK faces its highest debt level in over 60 years, with taxes near record highs and public spending on the rise, yet public services remain under strain. 

They noted that while the government is burdened with high interest payments on debt and increasing welfare costs, spending on health is expected to climb due to an ageing population, and defence funding will need to increase, all amid sluggish economic growth.

Paul Johnson, the director of the IFS, pointed out that these issues are largely overlooked by both main parties in their manifestos and that decisions regarding the size and scope of the state are inevitable, likely leading to either higher taxes or diminished public services. 

The IFS described the next government’s challenge as a “trilemma”: they must either raise taxes more than promised, cut some spending areas, or borrow more, allowing debt to rise further.

Johnson also attacked both Labour and the Conservatives for pledging not to increase income tax, National Insurance, or VAT. Despite these pledges, he suggested that it would be surprising if no other taxes were raised over the coming five years.

In response to the IFS’s analysis, Prime Minister Rishi Sunak stated that the Conservative manifesto is fully costed and aims to deliver tax cuts across various life stages, funded by controlling the welfare budget’s growth, which he described as unsustainable since the pandemic. 

The Liberal Democrats also defended their manifesto as fully costed, claiming it would enable investment in public services and the NHS, funded by ensuring banks and billionaires pay their fair share.

Labour leader Sir Keir Starmer focused on Labour’s future growth plans, adding that the economy has stagnated in the last 14 years. 

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