Chancellor Gordon Brown may be forced to choose between higher taxes or lower spending if he is not ...
Chancellor Gordon Brown may be forced to choose between higher taxes or lower spending if he is not to break his own rules the Institute for Fiscal Studies says after reviewing government general revenue figures for the first six months of fiscal 2002-3.
The problem is that tax receipts have grown much slower than forecast in the Budget, as both income and corporation tax revenues have grown at a slower rate than during the same period last year.
Government spending, meanwhile, has been rising sharply: expenditure in September alone was up more than 13% compared to the same month last year.
Spending in the first four months of the current fiscal year was up 6.4% compared to the same period last year, with a sharper increase during the past two months.
The IFS says that this increased spending is evidence that the commitment to higher spending on public services is coming through.
However, public investment is lagging far behind the government's £14.4bn target, with just £2.5bn spent in the first six months, which means a whopping £12bn must be spent in the next six months if the government is to hit targets outlined in the Budget.
The IFS says the overall balance between income and expenditure is not good at present, and Gordon Brown may be faced with some tough choices later in the fiscal year.
If tax revenues stay weak he will be able to increase public sector borrowing, but only if the problem is due to a "temporary downswing" in the economy.
However, raising taxes or reducing spending may be on the cards if there are other "structural problems".
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