Govt must raise £20bn in 'tax or spending cuts'

Date: 28th January 2009

As much as £20 billion needs to be raised by the government in taxation of public spending cuts, an influential think tank has claimed.

According to a report by the Institute of Fiscal Studies, it could take up to 20 years to reduce UK public sector debt to levels seen before the economic crisis.

The institute fears that the government could turn to radical measures to reduce the deficit.

It stated: "If borrowing costs were to return to the average levels of the 1990s, then further tax increases or spending cuts would probably be required to stop debt and debt interest costs rising unsustainably."

Despite the gloomy outlook, it added that the tax rises revealed at November's pre-budget statement were "one-tenth" the size of those announced at the budget in 1993.

Earlier this week, the Financial Times reported that this year's budget could be pushed back to April to accommodate London's G20 summit.