Tax rise 'to hit families'

Date: 21st October 2009

An influential thinktank has called for radical action to be taken on taxation if the UK is to reduce its government debts.

The National Institute of Economic and Social Research (NIESR) said that the basic rate of income tax could be raised from 20p to 27p, greatly increasing the average household tax burden.

Changes to VAT were also recommended by the new report.

The sales tax could be expanded in future to cover many more goods and services.

Ray Barrell, an NIESR economist, said: "We have to change the structural deficit or start stealing from our children.

"The choices we face are very stark and politicians are not facing up to it."

Public debts are likely to rise by around £175 billion this year as a result of the credit crunch and economic downturn.

The temporary VAT cut and falling corporate profits have damaged government tax revenues.

Meanwhile, rising unemployment has led to increasing demand for state benefits - stretching the public finances still further.