Fiscal think tank calls government tax cuts 'remarkable choices'
LONDON (Reuters) - Britain's government has made "remarkable choices" to cut income and corporation tax at a time when public spending is facing a severe squeeze to reduce Britain's large budget deficit, a leading think tank said on Tuesday.
The Institute for Fiscal Studies -- an independent research institute which scrutinises the British economy -- made the stark comments to a parliament committee examining a budget update delivered by Chancellor George Osborne last week.
"It's been very striking over this parliament how 12 billion pounds or so is being spent on increasing the personal (income tax) allowance (and) something like 7-8 billion pounds on reducing corporation tax," said IFS Director Paul Johnson, in remarks likely to be viewed as a criticism of Osborne.
"Those are remarkable choices, as it were, in the context of the deficit reduction that you have got, and therefore the spending cuts that you have got. Clearly cutting taxes makes the arithmetic elsewhere more difficult."
Johnson said last week that the deep spending cuts planned by Osborne could change Britain's public sector "beyond all recognition".
Britain's budget deficit is a hot political topic five months away from a national election. Plans on how to tackle it and how quickly it needs to be eliminated vary between the main political parties and sit at the heart of the election debate.
The deficit currently stands at somewhat over 5 percent of economic output, down from just over 10 percent when Osborne took office in 2010.
Osborne last week announced he would miss his most recent short-term budget deficit reduction targets, but was committed to restoring a surplus in 2018/19 through spending cuts, without raising taxes, if his Conservative party wins the election.
Johnson's comments lend weight to complaints from political rivals that Osborne's approach is too heavily focussed on spending cuts -- particularly in light of a pledge made by Prime Minister David Cameron to hand out a further 7 billion pounds of tax cuts after the election.
"It makes everything else much more difficult," Johnson said, referring to the effect of those planned tax reductions on the government's aim to run a budget surplus.
(Reporting by William James and David Milliken; Editing by Raissa Kasolowsky)
