Gordon Brown Under Increased Pressure To Raise Taxes

by Jason Gorringe, Tax-News.com, London

23 October 2001

According to the findings of a new study from the Institute for Fiscal Studies, pressure for the Chancellor to increase taxes will be 'all but impossible' to resist if the government goes ahead with the introduction of three expensive new tax credits.

The IFS study revealed that the cost of the tax credits, which are designed to help less wealthy taxpayers, has not been listed in government spending plans, but could amount to as much as £2.4 billion. However, separate research conducted by the House of Commons library paints an even more gloomy picture, putting the possible cost at around £5.2 billion.

Experts believe that any tax hikes or increased borrowing will be deferred until 2003, the year that the integrated child credit, employment tax credit, and the pension credit are set to be introduced.

The government has been strongly criticised for what the opposition parties see as a lack of forward planning, and earlier in the week, the shadow Work and Pensions secretary had this to say: 'Gordon Brown has promised to introduce three expensive new benefits in 2003 that have not appeared anywhere on his spending plans. Independent assessments suggest [that the credits] are likely to cost around £5 billion a year, but the Chancellor has been unable to say how he will fund them,' argued David Willetts.

However, the Treasury department has been dismissive of Mr Willetts' criticism, and in a response issued on Monday, painted him as something of a Scrooge figure. A Labour spokesman observed: 'David Willetts is now opposing tax cuts for families with children, opposing measures to make work pay for families without children, and opposing measures to reward pensioners for their savings.' He added that the cost of the new credits had been fully accounted for within Labour spending plans.

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