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Thursday, March 13, 2014

We're Screwed!

The Institute of Economic Affairs (IEA) has looked to the future, beyond the 2015 general election, and pronounced that whoever wins based on whatever short term "promises" are made the hapless taxpayers of Britain are screwed.

The IEA has stated in a report "The Government Debt Iceberg" that Britain faces “crippling” tax rises and spending cuts if it is to meet the needs of an ageing population. It has calculated that the Government would need to cut spending by over 25%, or impose significant tax hikes because official calculations had failed to factor in future pension and healthcare liabilities.

The IEA is quoted by the Telegraph:
As populations age, tax bases will grow more slowly while government spending rises faster."
Britain faces tax rises equivalent within just two years to more than £300BN (17% of GDP) in order to meet all future spending commitments. This is larger than the entire annual NHS budget and would increase taxes from 38% to 55% of national income.

Philip Booth, the IEA’s programme director, said tax increases of this magnitude would be “impossible” to implement “without choking off economic growth and actually reducing tax revenues."

Mr Booth correctly notes that successive governments have, in effect, lied to the voters:
The underlying problem is that successive governments have made promises which can simply not be honoured from the existing tax base. The electorate is grazing a fiscal commons at the expense of future generations.”
In the absence of further tax hikes, Jagadeesh Gokhale, the author of the report, stated that spending would have to be cut by more than 25% or health and welfare expenditure by 53% compared with the current implied level if all future spending was to be met out of tax revenue.

Sadly the British electorate who have over the years been fed some many lies by the politicians, wherein hard choices can be avoided, are now not in a fit state to make those hard choices because they don't want to face them.

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