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U.K. May Need to Raise Taxes After 2015 Elections, IFS Says

Feb. 6 (Bloomberg) -- The British government may need to increase taxes after the next election or risk culling more than a million public-sector jobs by 2018, a research group said in a report today.

The Institute for Fiscal Studies said current spending plans imply an average cut of one third in unprotected government departments. If the squeeze on the wage bill continues after the 2015 election, the total number of jobs lost could reach 1.2 million by the 2017-2018 fiscal year, compared with the Office for Budget Responsibility’s current forecast of 900,000. There is also more than a 50 percent chance that the government will have to increase borrowing this year, it said.

Chancellor of the Exchequer George Osborne’s deficit-cutting plan has been attacked by the opposition Labour Party for sapping economic growth as the U.K. teeters on the brink of its first ever triple-dip recession. Osborne, who said in December that austerity will continue until 2018, three years later than planned when the Conservative-led government came to power in 2010, will present his new budget to Parliament on March 20.

“The effect of concentrating all those cuts on currently unprotected areas of public services look hard to contemplate,” the London-based group said in its “Green Budget” report “Taxes could rise, hitherto protected elements of public spending, like the National Health Service and pensions, could be hit, or the date at which we reach fiscal balance will be pushed further out.”

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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