CEBR: tax hikes and spending cuts inevitable

Date: 13th July 2009

Irrespective of the result at the next general election, the party in power will be compelled to reduce spending and increase taxes in order to reduce the UK's budget deficit.

That is according to the Centre of Business and Economic Research (CEBR), which has said that though politics will impact upon the proportionality of the deficit cut, it will not affect its inherent necessity.

The CEBR believes a budget deficit reduction of £100 billion is required by 2014 to 2015.

It suggests that under the current government, this would consist of £40 billion in tax rises and £60 billion in spending cuts, while under a Conservative government these figures are expected to stand at £20 billion and £80 billion respectively.

Douglas McWilliams, CEBR chief executive, said that any proposed changes would take place soon after the general election result, which must be called by Gordon Brown next year at the latest.

He said: "It is likely that any government - particularly a new one - will be forced by political necessity to announce its fiscal consolidation programme early while it is still possible to blame the need for it on the previous government."

The CEBR believes the economy will contract by 4.1 per cent this year.