Tej Parikh, chief economist at the Institute of Directors, said, “Raising taxes could stifle our eventual recovery, especially with many companies already trying to pay back their loans. In many ways, the best way to reduce the public debt burden is actually to boost growth and productivity.
“For now, the Treasury can take advantage of low interest rates to help finance this. While there may be a temptation to raise taxes, the tax breaks are really what will encourage companies to invest, hire and innovate again – and it is the surest way to reduce the country’s debts . “
Commerzbank economist Peter Dixon expects a recovery to reduce the deficit over time.
He said, “Unless you blow up income tax or national insurance premiums or, God forbid, VAT, it’s hard to get the kind of value for money at short term that the government hopes, so it will be a long term. We have to accept that when we get a blow to the economy like this, you can’t just change the situation in a year or two. “
This should be possible as long as the financial markets maintain their stance over the past decade, favoring “safe haven” assets and thus lending to the government at a very low interest rate.