Economist expects more tax rises

Date: 15th December 2009

Last week's Pre-Budget Report represented a mere "stopgap", with harsher tax increases to come in the future.

This is the view of Howard Archer, chief European and UK economist at IHS Global Insight.

The expert also suggested that "decisive" action on reducing public debts, which can be achieved through reducing government spending or raising taxes, was needed following next year's general election.

Alistair Darling announced several tax changes in his Pre-Budget Report, including a reversion of VAT from 15 to 17.5 per cent and an extra 0.5 per cent increase on National Insurance from 2011.

However, a planned 1p corporation tax increase for smaller firms for 2010 was also scrapped in the report.

This is due to government fears that raising taxes immediately would kill off the UK's recovery from the recession.

Mr Archer said: "After [the election] the rating agencies and the markets will be looking for early and decisive action and indications from the new government about exactly how they intend to bring the budget deficit down.

"The Pre-Budget Report left far too many gaps and questions unanswered to be anything more than a stopgap as far as the markets and credit agencies are concerned."

Posted by Thomas Fletcher