- 30 Jan 08, 10:45 PM
I don't like to reduce the hard work of the much respected Institute for Fiscal Studies and Morgan Stanley to a single number. Their annual Green Budget is after all 299 pages long. (It is nothing to do with environment incidentally, it's green in the sense of a green paper).
But I know that most of you will not be reading those pages, and good journalism is often about boiling things down.
So I'm happy to boil down the green budget into one number: £8bn.
That's the tax rise needed by spring 2009.
The tax rise is required for the Chancellor's self-imposed fiscal rules. He needs it to ensure he meets his sustainable investment rule. And also to get the key measure of borrowing into surplus (the current balance, the measure used to assess the "golden rule".)
The IFS did not advocate tax rises last year, but over the course of 2007 it's become evident that the government's finances are far shakier than former Chancellor Gordon Brown expected at the time of his last budget.
In fact, the books now look £7bn worse than a year ago. And that, it should be said, occurred before any economic slowdown had time to bite. Corporation tax and stamp duty revenues have already been disappointing.
So what's to be done?
Well, the Institute for Fiscal Studies is the most respected source outside of government on the public finances - and in recent years has had a rather better record than the Treasury at predicting the need for extra money.
Each year it looks at the books, and today it said it thinks taxes need to go up by that £8bn, or the equivalent of about two pence in the pound on income tax if the economy performs more or less as Alistair Darling expects.
If the economy takes a serious dive, vastly more will need to be done.
This may not seem like a great time to hit households with extra tax - after all, the American government is allowing itself to borrow more in order to stimulate its economy.
But the IFS suggests that interest rates should be left to do the work of stimulating the UK...while the government needs to sort out its fiscal position.
In fact, the best reading of the IFS work is that the re-balancing that needs to occur for consumers - who will probably need to save more and borrow more carefully - applies also to the government.
The Chancellor and his predecessor have allowed themselves to assume that in years ahead, the good times will roll and money will flow in to the exchequer.
In fact, it seems the good times have just passed. That means both households and government have to adjust their expectations and spending accordingly (hence the impending economic slowdown).
It's just unfortunate, if the IFS is right, that the consumer and government cycle are so well synchronised. It might have been preferable for the two to be offsetting each other in the economy cycle, not supporting each other.
The real budget is expected in March - the Chancellor can update us on his thinking.
So far, the government has recognised that its medium term fiscal position needs some attention and has been restraining the growth of public spending as a result. But the IFS makes clear, a whole lot more needs to be done on top of that.
It's worth stressing that having boiled the IFS Green Budget down to an £8bn tax rise, that's not a prediction of what will happen - just their statement of what ought to happen.
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