Ahead of the next Budget statement in March, the Institute for Fiscal Studies (IFS) and Citi Research have published a review of the challenges and options facing the Chancellor.
The strategic challenges faced by the government – transition out of the EU, recovery from Coronavirus and movement towards “net-zero” – are well understood.
However, IFS and Citi warn that public finances are currently unsustainable. Sizeable tax increases will be needed at some point, but timing is likely to be difficult.
IFS warns against moving too quickly, for fear to de-railing the anticipated economic recovery. Tax rises of as much as £60bn per year may be needed but – say the researchers – “not any time soon”.
The report also notes that recent strategic changes have aggravated pre-existing economic inequalities within UK society.
The pressure on younger and less well-off workers is expected to increase and government support for the economy is gradually wound-down and “deferred” job losses manifest.
To support the most vulnerable in society, the report suggests retaining current support measures, but in a restricted and more tightly-targeted form. Specific suggestions are:
- Retain £20 per week boost to Universal Credit and Working Tax Credit
- Reintroduce Minimum Income Floor (MIF) for self-employed people in receipt of Universal Credit
- Focus “furlough” scheme on industries affected by Coronavirus in the long term (eg: leisure)
- Further support for the self-employed
The report also suggests increased finding for healthcare, education, justice and local government.
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