Another UK Think-Tank Warns Treasury Over Budget Shortfall

by Jason Gorringe, Tax-News.com, London

28 October 2002

The National Institute of Economic and Social Research (NIESR) warned last week that the United Kingdom's budget shortfall could grow to as much as £20 billion by 2006.

In a report published on Friday, the economic forecaster lowered its growth predictions, explaining that: 'We now expect GDP to increase by 1.4% in 2002 and by 2.5% in 2003- about three quarters of a percentage point lower in each year than the midpoint of the Treasury's budget forecasts.'

The analysis continued: 'In order to sustain public sector solvency, new measures are required to raise an additional £20 billion of tax revenue by 2006'.

Speaking last week, chief economist at the NIESR, Dr Martin Weale suggested, however, the Chancellor Gordon Brown is more likely to find a way around his strict self-imposed rules on borrowing than he is to risk increasing taxes in the UK by the equivalent of almost 6p on basic rate income tax in the run-up to the next election.

'One can already smell the fudge being cooked up in Great George Street (the Treasury's headquarters),' the Times quoted Dr Weale as observing.

However, on Friday the Treasury strenuously denied that Mr Brown would ever break his 'golden rule'.

'If people want to make accusations that this is being fudged then they should be able to substantiate them. There is not a whiff of fudge,' a spokesman for the Chancellor announced.

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