The authoritative and independent Institute for Fiscal Studies has urged chancellor Alastair Darling to put up taxes in his green budget: see Budget
It thinks that the public finances are so precarious that the chancellor should raise taxation by £8bn, even though the economy faces the risk of a severe slowdown. The rise recommended is the equivalent of a 2p increase in the basic rate of income tax. The IFS said that there was a greater than 50:50 chance that Mr Darling would break the Treasury's fiscal rule limiting public sector debt to below 40 per cent of GDP.
The main differences between the IFS's budgetary forecasts and those of the government stem from lower estimates for corporate tax and stamp duty receipts this year and next, reflecting slower profit growth in the short term and falling house prices. The IFS warns that Britain is falling down the international league table for budgetary prudence which was Gordon Brown's favourite watchword.
The US has given its economy a fiscal stimulus and many economists that is what Britain needs along with lower interest rates to prevent the slowdown getting out of control. However Robert Chote, the IFS director, warned that the day of judgement could not be postponed forever.
When the econonomy was in stronger shape, it is arguable that not enough was done to build up surpluses, although government was under strong pressure to spend on the NHS.