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Osborne Opens Door to 9 Billion-Pound Tax Increase, IFS Says

March 21 (Bloomberg) -- Britain’s voters may face higher taxes after the 2015 election if spending cuts outlined by Chancellor of the Exchequer George Osborne become too difficult to implement.

The Institute for Fiscal Studies said maintaining the spending restraint in place since 2010 would require a 9 billion-pound ($13.6 billion) squeeze mid-way through the next Parliament. In this Parliament, Osborne will borrow 70 billion pounds more that he predicted when he took office in May 2010, it said.

“It is quite possible that a future government would increase taxes in order to afford higher spending,” Rowena Crawford, an economist at the London-based group, said at a briefing today. “A fiscal consolidation has been expressed through spending but it would of course be possible to do it through tax instead.”

Osborne held firm to his austerity plan as the economy continues to stagnate, saying government spending cuts will carry on for three years after the next election. The IFS today cited a Treasury paper saying it would be possible to “do more of this consolidation through tax instead.”

The Office for Budget Responsibility, Osborne’s fiscal watchdog, yesterday said the economy will grow just 0.6 percent this year, half the pace it forecast in December. IFS Director Paul Johnson said that the Treasury had managed “by hook or by crook” to prevent borrowing from rising this year by deferring some spending commitments. As a result, the picture for future years had “deteriorated significantly,” he said.

“All this is desperately disappointing for a chancellor focused on reducing the deficit,” Johnson said.

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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