London Daily

Focus on the big picture.
Friday, Aug 08, 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
British Labour Government Utilizes Counter-Terrorism Tools for Social Media Monitoring Against Legitimate Critics
OpenAI Launches GPT‑5, Its Most Advanced AI Model Yet
Embarrassment in Britain: Homelessness Minister Evicted Tenants and Forced to Resign
President Trump nominated Stephen Miran, his top economic adviser and a critic of the Federal Reserve, to temporarily fill an open Fed seat
The AI-Powered Education Revolution: Market Potential and Transformative Impact
Chikungunya Virus Outbreak in Southern China: Over 7,000 Hospitalized
French wine makers have seen catastrophic damage to vines that were almost ready to be harvested after the worst fires in more than 70 years burned through the south of the country
US Lawmaker Probes Intel CEO’s China Ties Amid National Security Concerns
Brazilian President Lula says he’ll contact the leaders of BRICS states to propose a unified response to U.S. tariffs
Trump Open to Meeting Putin as Soon as Next Week, with Possible Trilateral Summit Including Zelenskiy
Katy Perry and Justin Trudeau spark dating rumors, joining high stakes world of celeb-politician romances
US envoy Steve Witkoff arrived in Moscow to seek a breakthrough in the Ukraine war ahead of President Trump’s peace deadline
WhatsApp Deletes 6.8 Million Scam Accounts Amid Rising Global Fraud
Nine people have been hospitalized and dozens of salmonella cases have been reported after an outbreak of infections linked to certain brands of pistachios and pistachio-containing products, according to the Public Health Agency of Canada
Karol Nawrocki Inaugurated as Poland’s President, Setting Stage for Clash with Tusk Government
Trump Signals JD Vance as ‘Most Likely’ MAGA Successor for 2028
US Charges Two Chinese Nationals for Illegal Nvidia AI Chip Exports
Texas Residents Face Water Restrictions While AI Data Centers Consume Millions of Gallons
U.S. Tariff Policy Triggers Market Volatility Amid Growing Global Trade Tensions
Tariffs, AI, and the Shifting U.S. Macro Landscape: Navigating a New Economic Regime
Representative Greene Urges H-1B Visa Cuts Amid U.S.-India Trade Tensions
U.S. House Committee Subpoenas Clintons and Senior Officials in Epstein Investigation
Sydney Sweeney Registered as Republican as Controversial American Eagle Ad Sparks Debate
Trump Accuses Major Banks of Politically Motivated Account Denials and Prepares Executive Order
TikTok Removes Huda Kattan Video Over Anti-Israel Conspiracy Claims
Trump Threatens Tariffs on India Over Russian Oil Imports
German Finance Minister Criticizes Trump’s Attacks on Institutions
U.S. Proposes Visa Bond of Up to $15,000 for Some Applicants
U.S. Farmers Increase Lobbying Amid Immigration Crackdown
Elon Musk Receives $23.7 Billion Tesla Stock Award
Texas House Paralyzed After Democrats Walk Out Over Redistricting
Mexican Cartels Complicate Sheinbaum’s U.S. Security Talks
Mark Zuckerberg Declares War on the iPhone
India Rejects U.S. Tariff Threat, Defends Russian Oil Purchases
United States Establishes Strategic Bitcoin Reserve and Digital Asset Stockpile
Thousands of Private ChatGPT Conversations Accidentally Indexed by Google
China Tightens Mineral Controls, Curtailing Critical Inputs for Western Defence Contractors
OpenAI’s Bold Bet: Teaching AI to Think, Not Just Chat
Tesla Seeks Shareholder Approval for $29 Billion Compensation Package for Elon Musk
Nvidia is cutting prices on its RTX 50-series graphics cards after sales slowed and inventories piled up
Ghislaine Maxwell Transferred to Minimum-Security Prison Amid Ongoing DOJ Discussions
U.S. Tariffs Surge to Highest Levels in Nearly a Century Under Second Trump Term
Matt Taibbi Slams Media for Role in Russiagate Narrative
Pilots Call for Mental Health Support Without Stigma
All Five Trapped Miners Found Dead After El Teniente Mine Collapse
Ong Beng Seng Pleads Guilty in Corruption Case Linked to Former Singapore Transport Minister
BP’s Largest Oil and Gas Find in 25 Years Uncovered Offshore Brazil
Italy Fines Shein One Million Euros for Misleading Sustainability Claims
JPMorgan and Coinbase Unveil Partnership to Let Chase Cardholders Buy Crypto Directly
Declassified Annex Links Soros‑Affiliated Officials and Clinton Campaign to ‘Russiagate’ Narrative
×