Tax rises feared as chancellor faces '£74bn spending gap'

20/10/2008

British households could pay an extra £3,000 each year in taxes, due to the current economic crisis.

According to figures cited by the News of the World, there is to be a £74 billion "borrowing gap" due to the recent moves the government has made to prop up the failing economy.

Faced by the risk of a total meltdown in the banking system, the government has promised £37 billion to RBS, HBOS and Lloyds TSB - so that it can buy shares in them and help them meet their costs.

Two other banks, Northern Rock and Bradford & Bingley, have been taken over by the government entirely.

Therefore, ministers face the choice between cutting public spending in order to close the gap, maintaining or increasing spending without raising taxes but opening up the borrowing gap still further, or raising taxes in a bid to balance the books.

Kevin Still, EuroDebt director, commented: "There is a danger that consumers are lulled into thinking that everything is all right after the government stepped in to try and bring some order to UK financial institutions, however, the worst is forecast still to come in 2009 and the tax payer is likely to see a further erosion in their take home pay.

"For those with unsecured debts and high rent or mortgages, a further hit of £250 per month from your disposable income may mean the difference between a manageable and an unmanageable financial position."

Tags; Housing Debt and Bills, Recent Graduate Debt, Young Family Finances, Retirement Money Problems, Credit Card Lifestyle,

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