Expect a rise in VAT

In a piece in today’s “Guardian” newspaper, economics editor Larry Elliott provides a very accessible summary of yesterday’s assessment by the Institute for Fiscal Studies (IFS) of what sums of money the three parties need to save if they are to meet their declared deficit reduction target and what proportion of these savings the parties have so far identified.

The IFS report suggests that, by 2014-15, the Conservatives will need to find £64bn a year cuts in their unprotected areas, but they have only detailed less than a fifth of the cuts that they would need. Labour needs to find cuts of £51bn, but it has identified only an eighth. The Liberal Democrats need to identify almost £47bn cuts, and they have identified a quarter.

Even more interestingly, Elliott explains why, whoever wins the election, value added tax (VAT) will have to rise. You’ve been warned.



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