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Brits face another 6 years of austerity pain

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Britain's painful run with austerity could last as long as 2018 warns the Institute of Fiscal Studies, with VAT creeping up to 25% to help boost public finances.

The IFS warned that there will be more pain as debt levels fail to go down, and that the Chancellor will have to abandon his fiscal target to reduce debt by 2015-16.

The Institute also predicts that there will be further spending cuts or tax increases for the next parliament in order to continue to meet Osborne’s other fiscal target.

The report is an adjustment on the Office for Budget Responsibility’s March 2012 forecasts for the economy and public finances.

The IFS report took into consideration the now weaker outlook for the UK economy and lower than expected tax revenues in the past 7 months.

Carl Emmerson, deputy director of the Institute for Fiscal Studies, said: “Since the Budget, the outlook for the UK economy has deteriorated and Government receipts have disappointed by even more than this year’s weak growth would normally suggest.

“As a result, the Chancellor might find himself having to abandon one of his fiscal targets.

“If much of the additional weakness this year feeds into a permanently higher outlook for borrowing, then in order to comply with his other fiscal target Mr Osborne would need to announce yet more tax rises or spending cuts for the next parliament in next week’s Autumn Statement.

“In that case the planned era of austerity could run for eight years – from 2010-11 to 2017-18.”

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