Financial market turmoil could blow a hole in Osborne's budget plans, says IFS
Chancellor's 'inflexible' budget surplus rule could come at a high cost, warns IFS, leading to big tax rises ( ) or spending cuts (AtW's comment: yeah right)
" Financial market turmoil and slower pay growth have blown a hole in George Osborne's plans to balance the books by 2020, according to the Institute for Fiscal Studies.
The IFS said the Chancellor was "boxed in" by a rule that requires the government to run a budget surplus every year from 2019-20 "in normal times" - or when the economy is growing at an annual rate of 1pc or more.
This means Britain faces the prospect of "big tax rises or spending cuts with very little notice to ensure the rule is met", the IFS said in its annual Green Budget.
The think-tank said the recent turbulence meant tax receipts could be much weaker than the Office for Budget Responsibility (OBR), the Government's fiscal watchdog, forecast just three months ago.
Last week, the Bank of England downgraded its projections for growth, wages and inflation amid a gloomier global outlook.
The IFS said weaker pay growth was likely to reduce tax revenues by £5bn over the next four years compared with current forecasts.
The turbulence in global markets could lower capital tax receipts by a further £2bn unless share prices recovered, the think-tank said.
This, combined with £8bn worth of unfunded tax cuts to come this parliament meant Mr Osborne "could be forced into additional spending cuts or tax rises if economic and fiscal forecasts again turn out unfavourably".
Even if the Chancellor's plans remain on course in 2019, the IFS said past errors in official forecasts meant there was a one-in-four chance more belt tightening would be needed by the end of the decade.
"There may be more tough decisions to come," said Paul Johnson, IFS director. "
More from the source: Financial market turmoil could blow a hole in Osborne's budget plans, says IFS - Telegraph
But as Waldorf says, it would have been a lot worse under Labour
Chancellor's 'inflexible' budget surplus rule could come at a high cost, warns IFS, leading to big tax rises ( ) or spending cuts (AtW's comment: yeah right)
" Financial market turmoil and slower pay growth have blown a hole in George Osborne's plans to balance the books by 2020, according to the Institute for Fiscal Studies.
The IFS said the Chancellor was "boxed in" by a rule that requires the government to run a budget surplus every year from 2019-20 "in normal times" - or when the economy is growing at an annual rate of 1pc or more.
This means Britain faces the prospect of "big tax rises or spending cuts with very little notice to ensure the rule is met", the IFS said in its annual Green Budget.
The think-tank said the recent turbulence meant tax receipts could be much weaker than the Office for Budget Responsibility (OBR), the Government's fiscal watchdog, forecast just three months ago.
Last week, the Bank of England downgraded its projections for growth, wages and inflation amid a gloomier global outlook.
The IFS said weaker pay growth was likely to reduce tax revenues by £5bn over the next four years compared with current forecasts.
The turbulence in global markets could lower capital tax receipts by a further £2bn unless share prices recovered, the think-tank said.
This, combined with £8bn worth of unfunded tax cuts to come this parliament meant Mr Osborne "could be forced into additional spending cuts or tax rises if economic and fiscal forecasts again turn out unfavourably".
Even if the Chancellor's plans remain on course in 2019, the IFS said past errors in official forecasts meant there was a one-in-four chance more belt tightening would be needed by the end of the decade.
"There may be more tough decisions to come," said Paul Johnson, IFS director. "
More from the source: Financial market turmoil could blow a hole in Osborne's budget plans, says IFS - Telegraph
But as Waldorf says, it would have been a lot worse under Labour
Comment