Taxes 'might go up by 5p'
Income tax might be put up by 5p in the near future, with the government using public money to cover the economic downturn.
The tax prediction was made to the Sunday Times newspaper, by an expert at the National Institute of Economic and Social Research.
Meanwhile, two separate reports from the Centre for Economics and Business Research (CEBR) and Capital Economics predict that the government's budget deficit will hit £90-£100 billion over 2010-11.
This is because of the economic slump caused by the credit crunch - which worsened last week with the takeover of HBOS by Lloyds TSB.
The mortgage lender was under financial pressure prior to the deal, with many experts doubting its ability to raise enough money to meet its costs.
Therefore, faced with falling revenues, the government retains the option to put up taxes in order to make up the financial shortfall.
The chancellor of the exchequer, Alistair Darling, denied the reports today.
He said: "This is not the time to be imposing additional burdens and indeed actually, this month, the vast majority of basic rate taxpayers, the 22 million people, are actually getting a tax rebate, a tax cut.
"I really don't think I can make the position any clearer than that. Basic rate taxpayers are receiving a tax cut."