The tax cuts announced in the mini-budget by British finance minister Kwasi Kwarteng created a huge uproar among the public with the economy also taking a massive nosedive. Following the announcement, the pound fell to its lowest against the United States dollar and the move also earned a lot of criticism from financial institutions around the world including the International Monetary Fund.
While the steps were withdrawn, the Institute for Fiscal Studies believes that the tax cuts and borrowing triggered by the announcement can end up costing the UK government more than $66 billion.
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According to the report published by the IFS, the United Kingdom may not match the predicted growth rate of 2.5 per cent and the deficit will cost around $66 billion by the year 2026. However, they included Brexit and the global financial crisis as other reasons behind the impending danger to the economy.
The announcement added to the concerns regarding the British economy as a deficit of $66 billion can virtually wipe out any progress made in the next few years. In that case, it will directly increase the national debt and if the trend continues, inflation can get out of control in that period.
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Although things seem quite grim in the report, IFS director Paul Johnson said that the situation can be controlled by introducing spending cuts and creating a capital vacuum temporarily in the public sector.
Both Kwarteng and newly elected Prime Minister Liz Truss have said that the tax cuts are a non-negotiable policy decision for them, and they intend to implement them in the future.
