Financial meltdown could force tax rises

Date: 17th September 2008

The knock-on effect of Monday's (September 15th) financial turmoil could be a rise in income taxation, a think tank has warned.

Lehman Brothers filing for bankruptcy was just the latest incident in a string of economic disasters for the UK, following on the ongoing credit crunch and housing market downturn.

A leading think tank has now warned that this could eventually lead to income tax rises of up to 5p in the pound and public spending cuts of up to £20 billion.

Ray Barrell, senior fellow at the National Institute of Economic and Social Research, said: "The government needs to be seriously rethinking spending plans given what has happened over the past year.

"Either spending needs to be cut or taxes must rise."

The warning comes on the back of the Institute of Fiscal Studies recently suggesting that government borrowing could be £65 billion higher than planned over the next three years.

A report in the ft.com yesterday (September 16th) claimed that taxes would rise under the next British government, whichever political party wins the election.