UK think tank calls for raising income tax rate to avoid cuts to public finances

In the UK taxes would need to increase by over £12 billion – the equivalent of 3p on the basic rate of income tax - following the general election, according to a report published on Wednesday.

Taking a grim view of the state of the public finances, the Institute for Fiscal Studies said the hikes were virtually inevitable to avoid 'unprecedented' further cuts to public services that would slash 35 per cent from most departmental budgets.

In a further prediction it said 1.2 million public sector jobs would have be cut between 2010 and 2017 – 300,000 more than what the independent Office for Budget Responsibility had called for.

According to IFS director Paul Johnson, the 'shock and awe' figures were necessary because the sluggish performance of the economy meant the chancellor was already borrowing £ 64 billion more than he planned to at the time of the 2010 budget.

The IFS claimed that whoever won the next election would need to find 'around £50billion' to keep the economy going and reduce the deficit. And if the next government continued the same policy of three parts cuts to one part tax rises, that will require about £12.5 billion in extra taxes.

This would mean every family in Britain could expect to be hit with a tax raid of £481 between 2015 and 2017.