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Monday, April 06, 2009

The Fiscal Black Hole

The government's recent actions to staunch the recession, and excessive spending in years of plenty, have produced a black hole in the country's finances which will cost families (in the form of tax increases) £1,250 each a year to plug.

That, at least, is the conclusion of the Institute for Fiscal Studies (IFS). The IFS quantifies the extra funding required as being around £39M per annum, and states that taxes will have to rise by at least £20BN a year or that there be a 5 year real freeze in public spending.

Given the size of the public sector (ie the number of voters employed by the government) it is reasonable to assume that the government will avoid a confrontation, and opt for the easier route of raising taxes (the government knows that it has been many centuries since the last taxpayers' revolt).

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