Tax rises and spending cuts of £100bn needed to reduce budget deficit

Major tax rises and spending cuts of at least £100 billion will have to be introduced by the next government in order to get the UK’s budget deficit down to a safe level, an economic think-tank has warned.

The Centre for Business and Economic Research (CEBR) said that the dramatic cuts would reduce the deficit to £50 billion by 2014-15. Without the spending measures, the deficit would soar to £158 bullion it added.

The think-tank predicted that if elected, the Conservatives would plug the deficit with £80 billion in spending cuts and £20 billion in tax rises. If Labour are re-elected, the CEBR forecasts £60 billion in spending cuts and £40 billion in tax rises.

The CEBR joined other think-tanks in suggesting that the recession was drawing to a close but warned that recovery would be “sluggish” with tax revenues continuing to fall and spending on unemployment benefits rising.

CEBR chief executive Douglas McWilliams said: “It is likely that any government - particularly a new one - will be forced by political necessity to announce its fiscal consolidation programme early while it is still possible to blame the need for it on the previous government.

"And it will look to achieve most of its results within a parliament.”

The think-tank forecasts that the economy will grow by 0.6 per cent next year and 0.9 per cent in 2011. In the Budget earlier this year, the Chancellor Alistair Darling predicted that the economy would recover far more swiftly from the recession, growing by 1.25 per cent in 2010 and 3.5 per cent in 2011.

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