00:00It's certainly the case that the new government has inherited a very difficult situation in
00:04terms of tax and spend and the public finances. It's not really true to say that it's a lot
00:09worse than we knew before the election. There's a little bit of additional information, but
00:14we knew before the election there was a big problem here. We knew before the election
00:18that if they wanted to avoid cuts, they would have to increase taxes. And as we at the IFS
00:22said time and time and time again, neither party was being honest with the electorate
00:26about this before the election. One of the problems I think the government's got is they've
00:31tied their hands really severely in terms of taxes. They voted for the £20bn of tax
00:37cuts that Jeremy Hunt introduced over the last year or so, and they've said they won't
00:41increase income tax, national insurance, VAT or corporation tax. Well, three quarters of
00:46our tax revenue comes from those four taxes, and if they're not going to raise those, it
00:50leaves them with a limited number of options. They might mess around with pension taxation,
00:55they might change capital gains taxes. There are one or two other changes they can make
01:00to things like inheritance tax, but it's difficult to get big amounts of money without taking
01:04economic risks with those sorts of taxes.
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