22 Sep 2022
Think tank the Institute for Fiscal Studies (IFS) has warned the government that any tax cutting measures announced in the forthcoming Mini Budget are likely to push borrowing and debt to 'unsustainable levels'.
Chancellor Kwasi Kwarteng will deliver the Mini Budget on 23 September. Experts predict that he could announce a reversal in the rise of national insurance rates; the cancellation of an upcoming rise in the rate of corporation tax; and possible cuts to other taxes, such as Stamp Duty Land Tax (SDLT).
These tax cuts will reflect Prime Minister Liz Truss's promises made during the Conservative Party leadership campaign.
The IFS stated that since the last publication of an economic forecast by the Office for Budget Responsibility (OBR) in March, energy prices and inflation have risen 'well beyond what was expected'. It also said that growth forecasts have slumped.
A combination of higher spending and substantial tax cuts 'leaves borrowing running at a much higher level than forecast in March', the IFS said. Its latest research outlines that borrowing will run at around £100 billion a year – £60 billion a year higher than forecast in March.
Carl Emmerson, Deputy Director at the IFS and an author of the research, said: 'While we would get to enjoy lower taxes now, ever-increasing debt would eventually prove unsustainable.
'The government is choosing to ramp up borrowing just as it becomes more expensive to do so, in a gamble on growth that may not pay off.'