The Institute for Fiscal Studies (IFS) has painted a grim picture, whereby the only way Philip Hammond can end austerity is to increase tax rates to the highest level for close to 70 years or tap the gilt markets for billions more in cash.
‘On the narrowest possible definition, ‘ending austerity’ as the prime minister has promised, would require the chancellor to find £19 billion of additional public service spending relative to current plans by 2022-23,’ the IFS said. This would equate to more than a penny on income tax.
The think-tank also reiterated its view that there will be no ‘Brexit dividend’, noting: ‘In 2022-23, net savings from contributions to the EU could be less than £1 billion a year, and higher UK administration costs for customs, for example, could easily exceed this saving.’
As the talks between the UK and the EU continue to make little headway, much of this down to intransigence around the Irish border issue and reports are now circulating that the EU’s chief negotiator is open to extending the Brexit transition for a year.