Comment: Whoever wins, taxes are going to have to rise

It couldn't be any plainer. As sure as eggs is eggs, whichever of the two main parties forms the next government, it would have to raise taxes or cut spending more than planned to keep borrowing to the "golden rule" level to which both parties have committed themselves.

That rule says the government will borrow no more than it would need to finance investment, and implies a deficit of around 1 per cent of GDP over time. With an underlying deficit of 2-2.5 per cent of GDP, this implies a fiscal tightening of pounds 7-pounds 10bn.

What's more, as the Institute for Fiscal Studies made clear in its analysis yesterday, to meet the existing spending targets would buck the trend of 80 years of history. Government spending just does not grow that slowly in a modern economy, and the current plans are, frankly, incredible.

If taxes do not rise more than planned - and it is worth recalling that big tax increases via petrol and tobacco duties, higher air passenger duty, and a crackdown on tax evasion are already on the cards - it would mark the end of the welfare state as we know it. We will be topping up privately our pensions, healthcare, and spending on our children's education.

There are two conclusions the financial markets should draw from the IFS's sobering analysis. One, taxes will go up quite steeply after the election - not immediately, but at some point during the next parliament. When it comes to the crunch and voters see their beloved NHS being run down, and the economy turns down so government borrowing starts to rise again, then we will get a tax-raising budget.

The second conclusion is that neither party is likely to be as tough as it pretends on borrowing, and the PSBR will not fall to zero by the turn of the century. Although there will need to be some reduction in the underlying structural deficit, neither Labour nor the Conservatives would struggle to eliminate it in practice.

None of this is the stuff of feelgood, so it is no surprise that the political parties themselves have not been spelling out the implications. But what is really odd about the election debate is how few people have cottoned on to how low UK taxes are by international standards, until the IFS pointed it out yesterday. Although government borrowing is too high, we have plenty of scope to close the gap and fund a bit more expenditure by paying more tax. After what happened to Neil Kinnock and John Smith at the time of the last election, nobody, apart from maybe Paddy Ashdown, is going to admit this. Almost everyone, it seems is fixated by the totem of taxcutting - and look at the hole that's got us into.

Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
Morrissey pictured in 2013
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Life and Style
lifeDon't get caught up on climaxing
Life and Style
Arts and Entertainment
Harry Potter (Daniel Radcliffe), Hermione Granger (Emma Watson) and Ron Weasley (Rupert Grint)
newsBloomsbury unveils new covers for JK Rowling's wizarding series
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star