A think tank has warned that annual tax rises of £40bn are needed by the mid-2020s if the government keeps spending constant and wants to balance its books by 2025. A tax challenge has emerged whereby the government is struggling to collect as much tax as it used to, after taking large numbers of people out of paying income tax. Paul Johnson said: “The chancellor has been unable to tackle the problems posed by the increasing numbers of self-employed and company owner managers, who pay less tax than similarly remunerated employees”.
This forecast has come following the chancellor unveiling upgraded growth and borrowing forecasts in the Spring Statement, which was announced on Tuesday 13th March 2018. Phillip Hammond said the UK economy had reached a turning point. In the Spring Statement, growth was now forecasted to be 1.5% in 2018 which is up from the 1.4% forecast by the Office for Budget Responsibility in November. Phillip Hammond also stated that debt was expected to fall as a share of GDP from 2018-2019, the first drop in 17 years, and that inflation would return to 2% by the end of the year.
Director of the Institute for Fiscal Studies (IFS), Paul Johnson, stated that “nothing much” had changed in the Spring Statement, and that the UK is continuing to suffer from the 2008 financial crisis. Paul Johnson also stated that the chancellor is facing problems regarding balancing growing demands for spending increases with his promise to eliminate the deficit by the mid-2020s.