Tax cut promises should be rolled back as UK faces worst problems since the 1950s, think tank warns

The UK Government was urged to be honest about tough economic trade-offs.

Promises of tax cuts during the general election campaigns may need to be rolled back as the UK faces its worst problems since the 1950s, a think tank has warned.

The Institute for Fiscal Studies, one of the most respected bodies in Westminster, warned whichever party wins the election may be unable to fund existing public services if politicians are not transparent about the trade-offs they face.

Prime Minister Rishi Sunak has repeatedly dropped hints about tax cuts in the Spring Budget, despite the Government's own forecasts predicting blows to growth.

Sluggish economic growth and high national debt will leave the next UK government facing one of the bleakest fiscal challenges since the 1950s, experts have warned.

Now the IFS have claimed that while the prospect of further giveaways might be tempting in an election year, it will risk a future tax hike or reductions in public spending.

It comes with the next UK Government facing sluggish economic growth and high national debt.

Both Labour and the Conservatives also promised to cut debt as a fraction of national income, but this will be much harder to achieve than in recent years amid high debt interest payments and low expected growth, it warned.

In a stark warning ahead of the spring Budget and the election expected in the second half of this year, the IFS said: “These challenges – unlike a conflict, pandemic or financial crisis – are entirely predictable.

“None can be meaningfully confronted by a government that wilfully ignores reality and the need to choose between difficult competing options.

“As tempting as it may be to engage in ‘cakeism’ – to seek to have the government’s fiscal cake and eat it – any party serious about governing after the election should resist the urge. The electorate surely deserves better than that.”

IFS director Paul Johnson said those looking to form the next government should be “honest about these trade-offs” and “if they are promising tax cuts, let’s hear where the spending cuts will fall”.

Last month, government borrowing was lower than expected, and interest payments on debt dropped sharply following a fall in the rate of inflation.

Analysts suggested this could give the Chancellor, Jeremy Hunt, more "wiggle room" to cut taxes.

However, the IFS said that for the next government it would be more difficult to reduce the amount of debt the UK has compared with its economic output "than in any other parliament since the 1950s".

Downing Street disputed the IFS, with the Prime Minister’s official spokesman saying: “Certainly we don’t agree with some of their analysis.

“We think we have created the right conditions to enable us to cut tax, with the tax changes coming into force.”

A Treasury spokesperson said: “Our decisive action to halve inflation and ensure debt falls as a share of the economy means we are now beginning to turn a corner, which is why we can afford tax cuts for 27 million working people this month.

“The best way to deliver sustainable funding for public services in the future is to grow the economy – the UK has grown faster than France, Germany and Japan since 2010 and the OBR say our action in spring and autumn will deliver the largest boost on record.”