The Institute for Fiscal Studies claimed Thursday that Britain’s next prime minister won’t be able to implement big, lasting tax cuts. This contradicts the objectives of the two Conservative contenders fighting to replace Boris Johnson.
Liz Truss wants to undo recent and planned tax increases by her opponent, former Finance Minister Rishi Sunak. Sunak wants to lower taxes once inflation is under control.
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The IFS, which acts as an unofficial judge of government spending plans, said that the highest inflation in 40 years will require short-term public investment.
The government’s budget watchdog says that next year, debt service costs will go up by 54 billion pounds.
IFS: More spending on public services is “probably inevitable” to deal with higher living costs.
Higher inflation boosts tax income, but less quickly than public spending, the IFS stated.
IFS Deputy Director Carl Emmerson stated the UK is poorer.
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“It’s hard to connect Ms. Truss and Mr. Sunak’s promises to lower taxes with the lack of clear measures to decrease public spending and an assumed intention to manage the nation’s finances properly,” he added.
The IFS forecasts that borrowing will be 16 billion pounds higher in the current fiscal year and 23 billion pounds higher in 2023-24 before returning to previous forecasts in 2024-25.
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The IFS warned the prime minister that this would offer him 30 billion pounds in day-to-day expenditure surplus, but it would be irresponsible to use it to cut taxes, the IFS warned.
The IFS based its budget projections on growth and inflation forecasts published on Aug. 4. Inflation is expected to surge around 13% in October before reverting to 2% in 2024.
$1 = 0.8334 lbs.
