‘Unsustainable’ national debt pile if Truss’s tax cuts gamble doesn’t work, says IFS

LIZ TRUSS’S plan to cut taxes and boost growth is a gamble that will put Britain’s debt pile on an “unsustainable” path and add £100 billion a year to borrowing, a leading think-tank has claimed.

The Institute for Fiscal Studies (IFS) said higher spending and tax cuts championed by the Prime Minister would spark a surge in the national debt, even after the Government stopped subsidising household energy bills.

It would be a “miracle” if the UK achieved a parallel increase in growth that ensured the economy grew faster than the debt burden, the IFS said.

Reversing April’s 1.25 percentage point increase in National Insurance and cancelling next year’s corporation tax rise would alone add around £30 billion to the annual deficit, the IFS said.

The IFS said future governments were likely to be forced into a renewed period of austerity to control debt.

The IFS said the tax burden would stay at the highest sustained level seen in the UK. It said boosting the economy would require a “concerted change in policy direction”, including tax reforms, tearing up planning laws and investment in education and infrastructure.

Kwasi Kwarteng, the Chancellor, wants to target a long-term growth rate of 2.5 per cent, but the IFS said it would take time to permanently boost the economy. Carl Emmerson, deputy director, said: “While we would get to enjoy lower taxes now, ever-increasing debt would eventually prove unsustainable.”

A separate report from the Centre for Policy Studies (CPS) suggested scrapping the planned increase in corporation tax from 19 per cent to 25 per cent would significantly boost the economy.

The CPS said this could lift GDP by 1.2 per cent in the long term and boost investment and wages.

Sterling slumped to $1.1305 against the dollar amid fears that renewed borrowing will worsen the public finances.