The Institute for Fiscal Studies (IFS) believes that the argument for tax cuts in the UK is stronger today than it was this time last year.
In their Green Budget, the IFS has concluded that the chancellor can temporarily cut taxes without risking an interest rate rise.
They also warned that a substantial tax cut could damage investor confidence.
Looking at predicted government borrowing this year, the IFS believes it will be around £2.9bn less than the official borrowing forecasts. However, the continuing eurozone sovereign debt crisis could see this level of borrowing increase.
Whilst the official economic growth forecast for 2012 is 0.7%, the Green Budget includes a much lower forecast of 0.3%. If the eurozone crisis comes to a head this year, it could result in a “deep recession” for the UK in 2012 and 2013, according to the IFS.
The IFS Green Budget is published each year ahead of the Budget, with suggestions of what the chancellor might include.
We will need to wait until the Budget on 21st March to see if any of the recommendations made by the IFS are included.
Photo credit: Flickr/HM Treasury
