Group predicts sharp tax increases

21/10/2009

Brits face tough times ahead, as the government tries to cut down on its debts following the recession.

The National Institute of Economic and Social Research (NIESR) said that the UK could face an increase in the basic income tax rate from 20p in the pound to 27p.

This would lead to the typical household having to pay an extra £1,844 per year.

Meanwhile, VAT could also be expanded, making many consumer goods and services more expensive.

The government could be forced into making the tough changes due to the deteriorating state of the public finances.

National debts are expected to rise by a record £175 billion this year, as tax revenues fall and demand for state benefits increase due to falling corporate profits and rising unemployment in the credit crunch.

Ray Barrell, an NIESR economist, said: "We have to change the structural deficit or start stealing from our children.

"The choices we face are very stark and politicians are not facing up to it."

Kevin Still, EuroDebt director, commented: "Government measure to cut national debt levels are likely to put a squeeze on disposable income for many, whether it be higher rates of personal tax or the impact of VAT on everyday goods and services. Whilst interest rates may be held during 2010, many homeowners may face significant increases if their promotional rates on their mortgage comes to an end.

"Recent surveys have shown that many households do not have liquid financial reserves to cope with even a short-term loss of income. EuroDebt would recommend tight budgeting of personal finances and taking professional advice is the income and expenditure sums don't add up. Re-financing for many is no longer an option with tighter lending criteria and a probability of some for of impairment on your credit file when contractual payments are missed. Non-borrowing debt solutions are becoming more popular, like Debt Management Plans and IVAs."

Tags; Current UK Economy, Credit Card Lifestyle, Recent Graduate Debt, Young Family Finances,

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