NIESR: Additional taxes required

Date: 30th April 2010

British businesses could be among those to find themselves with additional taxes to pay in order for the UK's public finances to improve.

According to the National Institute of Economic and Social Research (NIESR), spending cuts and additional taxes worth one per cent of GDP are going to be needed to put the country on a "better long-term footing".

A recently-published report from the organisation estimated that GDP will grow by one per cent this year and by two and 2.2 per cent in 2011 and 2012 respectively.

The institute also predicted that unemployment is set to rise further, peaking at 2.7 million next year.

Data from the forecast also predicted that CPI inflation will average 3.1 per cent in 2010 and will "fall back" to below two per cent over the next two years.

The NIESR warned that government forecasts are based on "optimistic" estimates.

"Public sector net borrowing will fall from 11.5 per cent of GDP in 2009-10 to 4.7 per cent in 2014-15," the organisation said.

"This is above the Treasury's estimate of four per cent, even though we are assuming somewhat lower real public spending over the medium term. We continue to worry that official projections are based on over-optimistic forecasts for GDP growth and for the buoyancy of tax revenues."

posted by Jacob Williams