Daily Express: The £8billion tax black hole you will have to plug

By Gabriel Milland Political Correspondent

GORDON Brown's botched handling of the economy has punched an £8billion black hole in Britain's accounts, a leading economics think-tank said last night.

The Institute for Fiscal Studies said plugging the gap caused by soaring spending and a sagging economy meant increasing taxes by £340 for every household.

Failing to raise taxes would force Mr Brown to break his promise to keep national debt below 40 per cent of the British economy, the IFS warned. Shadow Chancellor George Osborne branded the report "damning". He said: "This is startling evidence of just how completely Gordon Brown failed to prepare the British economy.

"While our competitors can use their surpluses to guard against turbulence, we borrowed in a boom, and have no room for manoeuvre.

"While other governments are using surpluses to fix their economies, Alistair Darling is raising taxes on entrepreneurs." Lib Dem Treasury spokesman Vince Cable said Mr Brown had "backed the British economy into a corner. The Government now seems to have a stark choice of either increasing taxation in an already depressed economy or ignoring its own fiscal rules, further damaging its credibility." But Matthew Elliott, of the TaxPayers' Alliance, called on the Government to cut spending and waste before raising taxes.

He said: "Fraud and error in the benefits system costs taxpayers £3billion a year, an estimated £1.24billion is wasted each year on inefficient IT procurement and over £1billion is overpaid in benefits." The IFS said that while the tax hike – equivalent to around 2p on income tax – would be "prudent", it expected Chancellor Alistair Darling to shy away from it for fear of a backlash from voters.

Raising taxes would also risk slowing the economy down even more.

The main danger, according the IFS, is that tax revenues will fail to grow as quickly as the Treasury has predicted between now and 2010/11. Adding to the potential black hole will be the £100billion potential cost of bailing out stricken bank Northern Rock. Mr Brown now risks breaking his muchvaunted "golden rule" of borrowing extra cash only for investment and not to pay salaries or cover current liabilities, the IFS said.

The gap between what the Government takes in and what it spends will grow even bigger if Labour tries to come good on its promises to pour even more money into public services.

By 2010 an additional £3.4billion will be needed to meet targets on cutting child poverty and a further £6-10billion to provide the resources which Sir Derek Wanless said in a review were needed to make the NHS a world-class service. The IFS said the Treasury was already planning to raise the UK's tax burden to a 24-year high, while cutting public spending to an eightyear low.

The IFS was also scathing about Government decisions to stage pay rises for police, nurses and other public sector workers. They "generate only modest, one-off financial savings".

If the Government wanted to rein in the cost of public sector manpower, it should reform gold-plated pension schemes for public workers, not fiddle with pay awards.