Gordon Brown Faces Tough Choices, Economists Warn

by Jason Gorringe, Tax-News.com, London

08 March 2004

Economists have warned that the UK's Chancellor of the Exchequer, Gordon Brown has some tough choices ahead of him in the run up to his forthcoming Budget.

According to a report in the Independent, accounting firm PricewaterhouseCoopers recently warned that the Chancellor will need to find an extra £10-15 billion per year in extra tax revenue or lower spending in order to balance the country's books.

However, his 'golden rule', which states that over the economic cycle the Labour government must not borrow to fund current spending, is likely to cause him some problems in the coming years, according to economists.

Speaking to the UK newspaper, PwC's head of macroeconomics, John Hawksworth observed that:

"There is no immediate crisis in the public finances that requires remedial action in the 2004 Budget. But eventually the Chancellor is likely to either increase taxes or tighten spending more sharply than indicated in [the] pre-Budget report."

Given that the government made a commitment in its last election manifesto not to increase the basic or higher rates of income tax, Mr Brown's options may appear to be somewhat limited.

However, observers in the tax world have suggested that he still has many options open to him, including freezing income tax and national insurance (NI) thresholds, increasing stamp duty rates and reducing property tax breaks, or increasing value-added tax (VAT) levels.

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