Labour admits taxes could go up in order to cut deficit
In order to tackle the UK’s deficit, tax hikes could well be on the agenda, according to reports today.
Last week, Chief Secretary to the Treasury Liam Byrne suggested that no new tax rises will be required in order to cut the UK’s ballooning deficit.
However, in a dramatic u-turn, asked by the BBC yesterday if he was still able to rule out a VAT rise, Mr Byrne admitted: “No. I mean, Chancellors reserve the right to come back to tax matters at every budget.”
The u-turn comes after the European Commission is expected reveal the Government’s plans for reducing the budget deficit are not ambitious enough.
A draft document, which has been seen by the Reuters news agency, warns Britain is not on target to trim its deficit in accordance with EU rules of below 3% of economic output by 2014-15.
The rules say deficits must be below 3% of GDP, but the UK’s is expected to reach £178 billion – 12.6% of GDP.
The Bank of England has suggested Britain still lacks a “credible” plan for tackling its huge debts.
Deputy Governor of the Bank, Charlie Bean, said: “The deficit now looks set to be around 12% of GDP this year, which is unsustainable in the medium term.”
However, in the build-up to next week’s Pre-Budget Report, Chancellor Alistair Darling has warned that the economic recovery is still too fragile warned that cutting the deficit too quickly could pose a threat to the recovery.
Meanwhile, speaking in Downing Street last night, Prime Minister Gordon Brown said: “We are going to cut our deficit by half over the next four years. But what we will not do is put the recovery at risk.
“The EU Commission has made clear that we should not have the fiscal stimulus removed until the recovery is assured,” added the PM.
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