UK may face additional spending cuts and tax increases: study

UK's Institute of Fiscal Studies has warned that the country may face additional spending cuts and tax increases due to weaker economic growth and lower tax revenues.

The chancellor would need to plug a £23 billion black hole if he was to meet his financial targets by 2018, if the problems were permanent the respected think tank said.

According to the IFS, achieving this from tax hikes alone would be "roughly equivalent to increasing the main rate of VAT from 20 per cent to 25 per cent".

Chancellor George Osborne would reveal his latest economic plans next week during the unveiling of his Autumn Statement on 5 December.

But the fact that there was no headroom for tax increases had been revealed in a new spending power report by Lloyds TSB.

The research by TSB had revealed that the squeeze on family budgets - as a result of stubborn inflation and weak wage growth - was just as strong in October as it was a year earlier and warned that increasing energy bills this winter would only worsen the situation. The IFS suggested that Obsorne might also have to strike off a key austerity goal as government borrowing was set to rise this year.
 
Meanwhile, Osborne has been finding the going tough as he seeks to keep financial targets on track as the economy continues to remain in the doldrums.