Osborne’s deficit plans deemed unachievable without tax rises

Image: altogethernow

Image: altogethernow

George Osborne’s ambitious target to reduce the deficit may have been set a bit prematurely. Despite intending to turn an £80bn budget deficit – the total by which government expenditure exceeds its revenue – into an absolute surplus of £10.1bn by the end of the decade, the National Institute of Economic and Social Research has reported that this may not be achievable.
Historically, the odds are against him seeing as the UK has only run a surplus six times within the last six decades and this figure is unlikely to change if the present growth and spending rates remain unmoved.  This ambitious target may lead to a more stringent fiscal policy which could, in turn, force spending cuts or tax rises.
Moreover, should Osborne successfully reach the March 2019 Budget with his plans unscathed, history suggests that these implementations would still be required. However, this may prove to be an issue, seeing as David Cameron and Osborne assured the public, as part of their election campaign, that national insurance, VAT or income tax would not be raised.
Paul Johnson, the IFS director commented: “With public spending reaching historically low levels relative to national income, promises on tax cuts to keep and pay for, and pressure on revenues from a number of taxes, there may be more tough decisions to come.”
Shadow chancellor John McDonnell has accused Osborne of “gambling with the public finances” considering it will be the taxpayers and public services that will be most affected. Those depending on child support may be particularly touched as it has been reported by an independent think-tank that a total of 1.5 million households could be at risk of losing a large portion or the entirety of their child benefit, as a result of their pay rising above £50,000.
The retirement funds of young professionals may also be at risk as it’s been reported that the new potential “flat rate” of tax relief system could cause a 25-year-old higher-rate taxpayer who saves £250 a month to lose up to “£161,263 from their pension between now and reaching state pension age” according to calculations by Hargreaves Lansdown.
The manner in which Osborne deals with this potential crisis could be what he is remembered for as he now has a number of key decisions left to make.

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