Quote: Weak economic growth and lower than expected tax payments have left a hole in the Chancellor’s plans that may need to be filled by higher taxes or further cuts to public spending, the Institute for Fiscal Studies said.
Even under the most “optimistic” forecast, the Chancellor will miss his target for debt to fall between 2015 and 2016 and should abandon the goal, the IFS said.
But a more pessimistic assessment suggests that Mr Osborne will also fail to achieve his key “fiscal mandate”, which is to balance the budget within five years, the IFS said.
The respected think-tank issues its projections today, as Coalition leaders prepare to finalise the details of the Autumn Statement, which the Chancellor will make next month.
Mr Osborne is said to be ready to delay a planned 3p increase in fuel duty after protests from Tory backbenchers, while senior Liberal Democrats are demanding fresh taxes on the wealthy.
In a new report, the IFS warned Mr Osborne that “the outlook for the public finances has worsened” since the Budget in March.
High rates of government borrowing this year mean there is almost no chance that Mr Osborne will meet his target for debt to fall as a share of national income between 2015 and 2016, the IFS said.
His core “fiscal mandate”, to be on course to balance the budget over a rolling five-year period, is also in jeopardy.
If the current weak growth and low tax receipts are permanent, the Chancellor will need another £23 billion of tax rises or spending cuts to be on course to meet his mandate by 2018, the report said.
The think-tank said this would be “roughly equivalent to increasing the main rate of VAT from 20 per cent to 25 per cent”, or imposing even deeper welfare cuts than announced so far. | 
