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Economists sound warning on British economy
Date:2010/5/17      View:1310
 
Economists have warned of Britain's large sovereign debt and suggested that the new government make huge cuts and raise taxes to tackle the nation's record deficit.

Britain's new Prime Minister David Cameron held his first cabinet meeting Thursday, when he symbolically cut ministers' wages by five percent, after he came to power two days ago on the back of the country's first coalition government since World War II.

A panel of economists regularly consulted by the British Treasury said Thursday that the government needs to raise 50 billion pounds (about 75 billion U.S. dollars) in the next 18 months.

It is highly likely that one of the headline tax increases will be a rise in Value Added Tax (VAT), which will take it from 17.5 percent to 20 percent, they said.

Of the 28 independent economists the Treasury surveyed, 24 said they expected the VAT rise to come into play before the end of 2011.

Another option is to scrap VAT exemption on items such as books, food and childrens' clothes to help rescue the public finance, they said.

Taxes might have to raise 50 billion pounds (about 75 billion dollars), Jonathan Loynes of Capital Economics said in an interview with the Daily Telegraph. This could mean an increase of 9.5 pence (100 pence=1 pound) on top of the VAT rise.

"Tax increases eventually worth 50 billion pounds (about 75 billion dollars)or more may be needed, at least some of which may be implemented in the emergency budget," Loynes said.
 
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