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IFS calls for ‘open debate’ on tax and spending

Paul Johnson IFS
Paul Johnson: parties must face reality (pic: Terry Murden / DB Media Services)

A leading think tank has called for an “open and robust discussion” about the state of the public finances which hang over the next government “like a dark cloud”.

The Institute for Fiscal Studies says slow GDP growth and high debt repayments on spending could mean more tax rises or cuts to public services.

Both Labour and the Conservatives have committed to get debt falling as a share of national income, while the SNP has continually challenged austerity measures without saying how it would tackle the challenge the country faces.

Paul Johnson, director of the institute, said a suite of “promising ideas” have been identified by the two main parties to revive growth, but said they “must also reckon with the reality of the economic and fiscal context in which this election is taking place”.

The IFS warns that without further measures, high interest payments on existing debt and low expected economic growth could make reducing future debt more difficult to achieve, whoever is in government, than in any parliament since at least the 1950s.

It says that barring a dramatic improvement in growth, the next government could face three broad choices: to continue with existing plans for spending cuts, raise taxes further or increase annual borrowing.

“The parties might well be reluctant to tell us which of these they would opt for upon taking office. That doesn’t mean that we should refrain from asking them.” it says.

Mr Johnson adds: “One can understand why the parties want to present a positive vision to the electorate, emphasise the importance of economic growth and to present plans for how they’d aim to deliver it.

“There is no shortage of promising ideas to choose from. But they must also reckon with the reality of the economic and fiscal context in which this election is taking place.

“Money is tight. Public services are creaking, taxes are at historically high levels, and both parties are hemmed in by their very clear pledges to get debt falling.

“We could get miraculously lucky with growth and escape having to make these tough choices. But we might not.

“Just because thousands of English and Scottish football fans are crossing their fingers and hoping for the best this summer doesn’t mean that the next Cabinet should do the same.

“The next government doesn’t need to enter office to ‘open the books’; those books are transparently published and available for all to inspect. We should use them as the basis for an open and robust discussion during the election campaign.”

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