Shadow chancellor's tax hike warning

Link to the article: Channel 4

Last Modified: 21 Mar 2009
By: Krishnan Guru-Murthy

Amid staggering predictions about future UK borrowing, George Osborne says he cannot rule out raising the top rate of tax above 45 per cent.

The shadow chancellor's statement to Channel 4 News follows warnings from economists that Britain's public finances will not stand another economic stimulus package to help the country out of recession.

The debt hanging over the government, according to the latest prediction, is ballooning at an alarming rate.

Ernst & Young's ITEM Club, which uses the Treasury's own forecasting model, says the government will need to borrow an extra £180bn in the next financial year.

Because less money is being generated by tax revenues, and spending, particularly on the unemployed, has increased, the group believes the budget deficit will reach nearly 13 per cent of gross domestic product.

That is a staggering 50 per cent higher than the chancellor, Alistair Darling, predicted in his pre-budget report in November.

Krishnan Guru-Murthy asked the shadow chancellor what all these figures meant.