The Institute of Fiscal Studies says the economy will remain in a “support and recovery” phase for some time, but higher taxes are inevitable.
They have warned that the government will need to raise taxes in order to pay for the economic support measures announced by Chancellor in his summer statement on Wednesday 8 July.
On Wednesday, the chancellor unveiled another £30bn of support, bringing the total cost to £190bn.
But it was revealed the UK’s tax authority queried its value for money.
According to recent data, the cost of the Chancellor’s economic support measures has risen to £190 billion. The Summer Economic Update included another £30 billion in measures to boost the UK economy following the coronavirus (COVID-19) lockdown.
What are IFS’s predictions about higher taxes?
The IFS has predicted that government borrowing will rise to £350 billion in 2020.
The business group recently published an analysis of the Summer Economic Update, in which it stated that further spending support will most likely be needed in the Autumn Budget. This could take the form of targeted tax cuts.
However, the IFS also warned of tax rises in the near future.
Commenting on the issue, Paul Johnson, Director of the IFS, said: ‘Let’s hold in the back of our minds that a reckoning, in the form of higher taxes, will come eventually.
“This is no normal recession. It’s the deepest in history,” Mr Johnson said. The IFS said annual borrowing as a share of the economy was on course to be its highest outside wartime in more than 300 years.
Mr Sunak has given few details about how he intends to pay for the huge public spending. However, he has previously refused to rule out tax rises.