UK Think Tank Warns Railtrack Collapse Could Spell Higher Taxes

by Amanda Banks, Tax-News.com, London

16 October 2001

A report from the Centre for Economics and Business Research (CEBR) in the UK has found that the Chancellor of the Exchequer, Gordon Brown, may be forced to raise taxes as a result of the combined costs of military action in Afghanistan and the collapse of Railtrack.

According to the report, the defence budget will expand in 2003/04 by about 2.5% of gross domestic product; and to add salt to the wound, the Railtrack collapse is likely to scupper government plans to raise around £9 billion from privately-owned companies under the Private Finance Initiative.

CEBR is an influential think tank concerned with business and policy evaluation issues in areas such as construction, property, information technology, e-business, rail and road transport, tourism, the motor industry and financial services.

The report has concluded that the Chancellor is likely to tighten up legislation governing corporate tax and raise National Insurance contributions some time next year. The CEBR stated: 'Although UK tax yields are high, the marginal rates, which affect incentives, are lower than in many countries. But the UK government is bad at spending money, achieving very low levels of service provision in relation to the sums spent.'

The CEBR cited OECD figures showing the UK tax burden at 41.1% of GDP last year, which is higher than the international average of 38.2% but under the European Union average of 44.2%. 'We could be projecting a UK tax burden as high as the EU average and well above the international average in five years,' the Centre added.

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