Think tank warns on UK finances

The government is facing a reduction in tax revenues

The deteriorating state of UK public finances means the next government will have to deliver tax rises and spending cuts, a think tank has warned.

The Centre for Business and Economic Research (CEBR) says a £100bn programme of cuts and tax rises is needed to repair the UK's public finances.

The CEBR says its proposed programme is needed to get the UK's budget deficit down to £50bn by 2014/15.

The UK recorded a record budget deficit of almost £90bn in 2008/09.

'Political necessity'

The CEBR says that if the Conservative party wins the next general election then the deficit will be plugged with £20bn in tax rises and £80bn in spending cuts.

And it says if Labour holds on to power then it predicts £40bn in tax rises and £60bn in spending cuts.

"It is likely that any government - particularly a new one - will be forced by political necessity to announce its fiscal consolidation programme early while it is still possible to blame the need for it on the previous government," said CEBR chief executive Douglas McWilliams.

"And it will look to achieve most of its results within a parliament."

The CEBR believes that the UK economy will contract by 4.1% this year - a more pessimistic outlook than the official 3.5% Treasury estimate - before growing by 0.6% next year and 0.9% in 2011.

Mr McWilliams said the recovery would be "sluggish", which will lead to lower tax revenues and more money spent on unemployment benefits.