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Weak UK tax revenue could thwart Osborne's surplus aim, thinktank says
[LONDON] British finance minister George Osborne's ambition to run a budget surplus by the end of the decade could easily be frustrated by disappointing tax revenues, the Institute for Fiscal Studies said on Monday.
Britain's finance ministry could miss out on 5 billion pounds (US$7.25 billion) of income tax if wage growth disappoints by just 1 per cent by 2019-20 compared with forecasts made in November, the non-partisan IFS said in a report ahead of Osborne's annual budget on March 16.
The IFS said economic growth this year was likely to be weaker than the 2.4 per cent forecast in November by the government's budget watchdog, the Office for Budget Responsibility.
Last week the Bank of England also downgraded its forecasts for both growth and wages over the coming years.
That could put Osborne's plan to run a budget surplus by the 2019-20 financial year in doubt, a goal described last year by the IFS as having a 50-50 likelihood of success.
Reducing Britain's budget deficit has been Osborne's main aim since he became finance minister in 2010.
While he has halved the deficit since the Conservative government came to power in 2010, at 4.9 per cent of gross domestic product in 2014-15 it was still one of the largest among major advanced economies.
The think tank also said Osborne had promised 8 billion pounds a year of unfunded income tax cuts, which could mean Osborne will need to enact more stringent cuts to spending or extra tax rises to achieve a surplus.
"Uncertainty in the fiscal forecasts means that he may well have to cut spending further or raise taxes to get to surplus in 2019-20," Paul Johnson, director of the IFS, said.
Britain's economy will grow around 2.2 per cent in 2016, the IFS said, similar to growth in 2015. But it warned that with a lot of fiscal consolidation to come and uncertainty in the global economy, the risks to growth were "very much skewed to the downside".