IFS: Starmer and Sunak must pick cuts, debt or tax hikes in ‘trilemma’

A “stark” choice between more borrowing, tax rises or spending cuts will soon be faced by whichever party wins the general election, the Institute for Fiscal Studies (IFS) has warned.

The think tank has cautioned that any incoming government will be forced to make a choice of the three options in order to address the problems facing the public finances.

IFS Director Paul Johnson said: “Regardless of who takes office following the general election, they will – unless they get lucky – soon face a stark choice. Raise taxes by more than they have told us in their manifesto.

“Or implement cuts to some areas of spending. Or borrow more and be content for debt to rise for longer. That is the trilemma. What will they choose? The manifestos have left us guessing.”

READ MORE: IFS: ‘Sharp cuts’ likely under Labour to justice system and further education

It follows a Labour commitment to not increase taxes on working people, namely income tax, VAT and national insurance.

Johnson claimed every election sees parties compete on tax, but this election has become a “tax lock arms race”. He also claimed Labour’s vow not to raise taxes on working people “rules out essentially all tax rises”.

He further dismissed  Labour’s additional day-to-day spending commitments as “essentially trivial”. He said: “They offer nothing concrete on welfare. They do plan to boost green investment by an average of £5 billion a year.

“Given that spending on green investments is currently only around £8 billion a year, this is a major pledge, even if much watered down. But it would still leave public sector net investment falling under a Labour government.”

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