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Adverse credit could rise with tax burden

Published: 21/10/2009

High government debts will lead to radical reforms in the tax system, National Institute of Economic and Social Research (NIESR) has suggested.

The organisation called for a 7p increase in the basic income tax rate in new analysis.

VAT could also be widened to cover more goods and services if the recommendations of the NIESR report are adopted.

The analysis was made in response to the continuing deterioration of the public finances, which are predicted to go £175 billion into the red this year.

This is due to the ongoing impact of the credit crunch and recession.

Governments can reduce their deficits by cutting public spending and increasing tax burdens.

NIESR suggested that the average household would pay £1,844 more per year due to the income tax hike alone - an increased burden that could cause damage to personal finances and push more people into adverse credit.

Ray Barrell, an economist at the organisation, said: "We have to change the structural deficit or start stealing from our children."

He added: "The choices we face are very stark and politicians are not facing up to it."

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