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UK deficit 'more than predicted' UK deficit 'more than predicted'
(about 2 hours later)
The UK's deficit is about 2.7% more than Chancellor Alistair Darling acknowledged in the pre-Budget report, the Institute for Fiscal Studies says. The government may have to find an extra £39bn a year by 2016 to bring borrowing under control, the Institute for Fiscal Studies (IFS) says.
The government may have to find £39bn a year by the end of 2015/16, to plug the gap in its finances, the IFS predicted. This is on top of the £38bn of fiscal tightening the chancellor announced in the pre-Budget report (PBR).
Mr Darling, who will present his Budget on 22 April, has said the recession will be more severe than forecast. If the money were raised entirely through tax-raising measures then families would face an average increase of £1,250 in taxes a year.
He and Gordon Brown are due to meet the Bank of England governor to discuss measures agreed at the G20 summit. Alistair Darling is due to present his Budget on 22 April.
In making its calculations the IFS assumed that the government would ultimately have to cover bank losses of £130bn, which have so far not been included in the government's calculations. He has warned that the recession will be more severe than forecast.
He and Gordon Brown will meet the Bank of England governor later to discuss measures agreed at the G20 summit.
In making its calculations, the IFS assumed that the government would ultimately have to cover bank losses of £130bn, which have so far not been included in the government's calculations.
Tax questionTax question
The IFS says that to raise the £39bn without raising any taxes, there will need to be a five-year real freeze in total public spending.The IFS says that to raise the £39bn without raising any taxes, there will need to be a five-year real freeze in total public spending.
FROM THE TODAY PROGRAMME More from Today programme FROM THE TODAY PROGRAMME More from Today programme
Alternatively, if the money was raised entirely through tax-raising measures, then families would face an average increase of £1,250 in taxes a year. The government intends to achieve the fiscal tightening announced in the PBR mainly through a reduction in spending.
The IFS predicts that taxes in Britain will have to rise by at least £20bn a year to cover record borrowing.
In the pre-Budget report Mr Darling announced £38bn of fiscal tightening, to be achieved mainly through a reduction of spending but also through higher taxes.
Shadow chancellor George Osbourne told the BBC the Conservatives had not ruled out further tax rises although they would seek to avoid them.Shadow chancellor George Osbourne told the BBC the Conservatives had not ruled out further tax rises although they would seek to avoid them.
They would be looking for restraint on spending, he said.They would be looking for restraint on spending, he said.
Global dealGlobal deal
Last week, leaders of the world's largest economies reached a deal to tackle the global financial crisis with measures worth $1.1 trillion (£681bn).Last week, leaders of the world's largest economies reached a deal to tackle the global financial crisis with measures worth $1.1 trillion (£681bn).
Resources available to the International Monetary Fund (IMF) will be tripled to $750bn; there will be sanctions against secretive tax havens and tougher global financial regulation; and about $250bn will go into boosting global trade.Resources available to the International Monetary Fund (IMF) will be tripled to $750bn; there will be sanctions against secretive tax havens and tougher global financial regulation; and about $250bn will go into boosting global trade.
Downing Street said the prime minister was "clear that the consensus reached at the G20 last week will make a difference to the lives and to the aspirations of families and businesses in the UK".Downing Street said the prime minister was "clear that the consensus reached at the G20 last week will make a difference to the lives and to the aspirations of families and businesses in the UK".
The meeting would "help to ensure that the new regulation and supervision agreed at the summit is effected in Britain so that people can have confidence in the banks, and that British companies can access the trade finance that is being made available", a spokeswoman said.The meeting would "help to ensure that the new regulation and supervision agreed at the summit is effected in Britain so that people can have confidence in the banks, and that British companies can access the trade finance that is being made available", a spokeswoman said.