‘Next government will have to raise taxes for public services’

THE winner of the next general election will have to raise taxes to maintain the current provision for public services, according to a think-tank.

The National Institute of Economic and Social Research (NIESR) added that there is “no fiscal headroom for any further tax cuts” amid slow economic growth and easing inflation.

The UK economy grew by 0.1% in 2023 after pressure from higher interest rates and hikes by rate-setters at the Bank of England to slow inflation.

In its latest report, NIESR said it forecasts GDP will have grown 0.4% over the first quarter of 2024 and will rise 0.8% for the year as a whole, compared with 2023.

Nevertheless, it said this still represents an “anaemic UK GDP growth trend”. It comes a week after the UK’s economic growth prospects were downgraded for the next two years by the Organisation for Economic Cooperation

and Development (OECD), adding that it is on track for the weakest growth of the G7 group of countries next year.

Stephen Millard, deputy director for macroeconomic modelling and forecasting at NIESR, said: “Despite the welcome fall in inflation, UK growth remains anaemic. This will make it difficult for any incoming government to carry out the muchneeded investment in infrastructure and the green transition, as well as increase spending on public services and defence, without either raising taxes or rewriting the fiscal rules.”