An office worker looks at a screen showing trading on the FTSE 100 index
TAXPAYERS in Britain face up to 5p in the pound in extra taxes because of the credit crunch created by the banks, leading economists have warned.
After a week of unprecedented financial turmoil, they predict that government borrowing is about to surge as the Treasury’s tax take is slashed by a slump in earnings from the City and the downturn.
Leading forecasters say the government will soon be forced to borrow as much as £100 billion a year, giving Britain easily the biggest budget deficit of any western country.
Any tax rises would come on top of increases imposed by Gordon Brown when he was chancellor. He repeatedly raised indirect “stealth” taxes while leaving income tax unchanged. Taxes went up by 3% of national income, equivalent to more than 10p on the basic rate of income tax.
The warning coincides with news that American executives of the failed Lehman Brothers bank, parts of which were taken over by Barclays last week, will still receive millions in bonuses.