Chancellor George Osborne could end up hiking taxes in order to meet his own rigid fiscal targets, a leading think tank has warned this morning.
In its annual Green Budget out today, the Institute for Fiscal Studies (IFS) said Osborne has set himself a "very inflexible target" to balance the budget by the end of the decade – and could be forced into more spending cuts or sudden tax rises if economic and fiscal forecasts take a turn for the worse.
"He also has some big promised tax cuts to finance, faces considerable uncertainty over key tax revenues, and may yet find the spending squeeze hard to maintain," the independent research institute warned.
The IFS also pointed to Osborne's new fiscal rule requiring the government to run a surplus every year from 2019–20 “in normal times” as cause for concern, saying the convention was "simple" but difficult to achieve, given the UK has only run a surplus eight times in the last 60 years.
"Osborne’s new fiscal charter is much more constraining than his previous fiscal rules," said IFS director Paul Johnson, adding, "Uncertainty in the fiscal forecasts means that he may well have to cut spending further or raise taxes to get to surplus in 2019–20.
"With public spending reaching historically low levels relative to national income, promises on tax cuts to keep and pay for, and pressure on revenues from a number of taxes, there may be more tough decisions to come. How he responds to any further unpleasant fiscal surprises may, more than anything we have seen so far, come to define his period as chancellor.”