UK may need £6bn in new tax cash, IFS claim

George Osborne has been warned he may need to raise �6bn in new tax revenue. Picture: PA

George Osborne has been warned he may need to raise �6bn in new tax revenue. Picture: PA

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THE UK 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, economic experts warned yesterday.

The Institute for Fiscal Studies said that, despite the £11.5bn worth of reductions for 2015-16 set out yesterday by Mr Osborne, savings of a similar magnitude had already been pencilled in for the following two years.

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 spending cuts alone or whether taxes would have to rise as well.

He said ministers had previously said that 80 per cent of the savings needed would come from spending cuts and from 20 per cent 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.

Meanwhile, Chief Secretary to the Treasury Danny Alexander said that he thought the UK Government’s plans to cut £11.5bn were achievable.

Mr Alexander said: “One of the things we have established as a government is a group at the centre with real commercial expertise in renegotiating contracts and IT delivery. This is the first time a chief secretary has had that expertise to call on. That was helpful in finding the savings we needed and finding them in the right way.”

Holyrood leaders clash on austerity

Scotland’s future in the UK offers only “continued austerity” as the main pro-union parties adopt a cuts agenda, Alex Salmond has warned.

But Labour leader Johann Lamont, pictured, insisted that an independent Scotland would face even harsher austerity than the UK amid concerns that SNP “big business” tax breaks will see major job cuts.

The leaders clashed yesterday during the final First Minister’s Questions session at Holyrood before the summer recess.

Ms Lamont questioned how a separate Scotland could have a different policy from the rest of the UK – which is expected to have some controls over public spending and borrowing if Scotland retains sterling. Westminster “would be unwilling to concede” any oversight from Scotland over fiscal policies in the UK, she added.

Mr Salmond insisted Scottish Government analysis makes it clear that a corporation tax

cut will attract multi-national firms to Scotland and create up to 27,000 jobs.

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