Latest government figures 'could mean tax increase'

Date: 22nd October 2009

Tax increases from the government are inevitable, new analysis from accountants suggested today (October 22nd).

Professional services provider PricewaterhouseCoopers (PwC) said that public sector deficits were now so high that ministers would have to take steps to reduce the debt.

The comments follow the release of official figures showing that the public sector moved £11.3 billion further into the red over September.

Net borrowing is predicted to reach a record £175 billion over the whole of 2009.

One of the main reasons for these increasing debts is the decline in tax revenues caused by the credit crunch and economic downturn.

The government's corporation tax, capital gains tax and VAT takes have all been hit.

John Sison, head of government and public spending group at PwC, said: "You either have to raise taxes, or decrease spending or a combination of the two."

He added: "If they [the government] do anything on tax it'll be a mixture of the big three taxes – national insurance, income tax and VAT."

Analysis from the National Institute of Economic and Social Research released this week suggested that the basic rate of income tax could be increased from 20p to 27p in future, so that the government can reduce its debts.