London Daily

Focus on the big picture.
Monday, Jul 07, 2025

Britain faces £40bn a year tax rises to stop debt spiralling

Britain faces £40bn a year tax rises to stop debt spiralling

Rishi Sunak, the chancellor will need to raise taxes by more than £40bn a year by 2025 to stop public debt spiralling upwards, according to forecasts by the Institute for Fiscal Studies.
In an assessment of the state of Britain’s public finances, the think-tank said government borrowing was set to reach £350bn, or 17 per cent of gross domestic product, this year, the highest level in peacetime in more than three centuries.

That compared with the £55bn forecast by the Office for Budget Responsibility at the March Budget.

Around two-thirds of the increase is owing to extra spending to bolster public services and limit the economic impact of the pandemic — fiscal support that had been necessary, the IFS said, adding that with borrowing costs low, “additional spending now that helped to deliver a more complete recovery would almost certainly be worth doing”.

But the think-tank forecast borrowing would still be more than £150bn in 2024-25 in a central scenario, even if none of this extra spending was continued. Public sector net debt would at best be close to 100 per cent of national income, or as much as 130 per cent in a worst-case scenario.

“Rishi Sunak said that this Conservative government will always balance the books. A safer bet would probably be to say that this Conservative government will never balance the books and I wouldn’t advise . . . that they try any time soon,” said Carl Emmerson, the IFS deputy director.

A government that wanted to keep debt constant at 100 per cent of GDP, with borrowing at £80bn a year would need to tighten fiscal policy by 2 per cent of GDP by 2024-25, the IFS found. That amounted to more than £40bn in today’s terms, even before an ageing population added the pressure on government to keep spending.

The dire long-term outlook for the public finances is largely owing to the UK’s poor economic prospects.

Christian Schulz, chief economist at Citi — whose forecasts underpin the IFS fiscal projections — said a recent rebound in economic activity should not be mistaken for a recovery, with UK output likely to remain 7-10 per cent below pre-pandemic levels at the end of the year. It would still be almost 5 per cent short of its pre-pandemic trend at the end of 2024, the bank forecast.

Britain was underperforming almost every other country in the OECD, with the exception of Spain, he said, partly because its initial lockdown had lasted longer and partly because its reliance on services and high degree of urbanisation made it especially vulnerable to the Covid-19-crisis.

There were good reasons to believe the UK was now entering a vicious cycle in which consumers would spend less and businesses cut jobs in response — with job destruction that had been masked by the furlough scheme set to become visible, he added.

The warning of looming job cuts reinforces separate research published on Monday by the think-tank IPPR, which said that around 1.8m viable jobs would be in jeopardy when the UK’s full furlough scheme ends later this month.

The Job Support Scheme that is set to replace it — even when combined with a £1,000 bonus for retaining previously furloughed workers — would not make it profitable enough for employers to preserve jobs, the think-tank said.
Newsletter

Related Articles

0:00
0:00
Close
U.S. Enacts Sweeping Tax and Spending Legislation Amid Trade Policy Shifts
Football Mourns as Diogo Jota and Brother André Silva Laid to Rest in Portugal
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
London Stock Exchange Faces Historic Low in Initial Public Offerings
A new online platform has emerged in the United Kingdom, specifically targeting Muslim men seeking virgin brides
Trump Celebrates Independence Day with B-2 Flyover and Signs Controversial Legislation
Boris Johnson Urges Conservatives to Ignore Farage
SNP Ordered to Update Single-Sex Space Guidance Within Days
Starmer Set to Reject Calls for Wealth Taxes
Stolen Century-Old Rolls-Royce Recovered After Hotel Theft
Macron Presses Starmer to Recognise Palestinian State
Labour Delayed Palestine Action Ban Over Riot Concerns
Swinney’s Tax Comments ‘Offensive to Scots’, Say Tories
High Street Retailers to Enforce Bans on Serial Shoplifters
Music Banned by Henry VIII to Be Performed After 500 Years
Steve Coogan Says Working Class Is Being ‘Ethnically Cleansed’
Home Office Admits Uncertainty Over Visa Overstayer Numbers
JD Vance Questions Mandelson Over Reform Party’s Rising Popularity
Macron to Receive Windsor Carriage Ride in Royal Gesture
Labour Accused of ‘Hammering’ Scots During First Year in Power
BBC Head of Music Stood Down Amid Bob Vylan Controversy
Corbyn Eyes Hard-Left Challenge to Starmer’s Leadership
London Tube Trains Suspended After Major Fire Erupts Nearby
Richard Kemp: I Felt Safer in Israel Under Attack Than in the UK
Cyclist Says Police Cited Human Rights Act for Riding No-Handed
China’s Central Bank Consults European Peers on Low-Rate Strategies
AI Raises Alarms Over Long-Term Job Security
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Musk Battles to Protect Tesla Amid Trump Policy Threats
Air France-KLM Acquires Majority Stake in Scandinavian Airlines
UK Educators Sound Alarm on Declining Child Literacy
Shein Fined €40 Million in France Over Misleading Discounts
Brazil’s Lula Visits Kirchner During Argentina House Arrest
Trump Scores Legislative Win as House Passes Tax Reform Bill
Keir Starmer Faces Criticism After Rocky First Year in Power
DJI Launches Heavy-Duty Coaxial Quadcopter with 80 kg Lift Capacity
U.S. Senate Approves Major Legislation Dubbed the 'Big Beautiful Bill'
Largest Healthcare Fraud Takedown in U.S. History Announced by DOJ
Poland Implements Border Checks Amid Growing Migration Tensions
Political Dispute Escalates Between Trump and Musk
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
US Senate Votes to Remove AI Regulation Moratorium from Domestic Policy Bill
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
Jury Deliberations in Diddy Trial Yield Partial Verdict in Serious Criminal Charges
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
King Charles Plans Significant Role for Prince Harry in Coronation
Two Chinese Nationals Arrested for Espionage Activities Against U.S. Navy
Amazon Reaches Major Automation Milestone with Over One Million Robots
Extreme Heat Wave Sweeps Across Europe, Hitting Record Temperatures
×