Ben Brettell, senior economist at Hargreaves Lansdown, explains why tax rises look assured whoever wins the election, but says the impact on financial markets should be short-lived
One of the forthcoming election’s primary battlegrounds will be the budget deficit. Despite continuing political rhetoric and press coverage about ‘austerity’, government spending has continued to rise.
The coalition’s previously stated aim of cutting the deficit to £40bn by this year has been missed, and missed by some margin - the latest figure is almost £100bn. This has not been helped by the unexpected weakness in income tax receipts (a mainstay of government income).
Compared to 2014 forecasts, the Office for Budget Responsibility calculates a £25bn shortfall in income tax revenues.
When including forecast numbers for the current financial year, the government will have borrowed more than £550bn over the course of this parliament. This represents around £21,000 for every UK household. Our national debt now stands at £1.4 trillion, the interest payments on which total almost £50bn each year.
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