According to the National Institute for Economic and Social Research, if the UK decides to join the euro the government may be forced to raise taxes in order to comply with the provisions of the Maastricht Treaty.
The Institute has predicted that mounting public spending coupled with dwindling tax collection will plunge the UK into a deficit of around 2% of GDP by 2005. This would put it in breach of the Maastricht Treaty, which stipulates that eurozone members must cut deficits.
Speaking to the Independent on Thursday, Professor Ray Barrell, a senior economist with the influential think-tank warned that: 'The pact may require us to raise taxes if it stays as it is. The only reason we would see for tax rises would be signing up to monetary union and the pact being interpreted in a strict way.'
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