IFS: George Osborne may have to raise VAT to 25% to balance the budget - Telegraph.co.uk

In a new report, the IFS warned Mr Osborne that "the outlook for the public finances has worsened" since the Budget in March.

High rates of government borrowing this year mean there is almost no chance that Mr Osborne will meet his target for debt to fall as a share of national income between 2015 and 2016, the IFS said.

His core "fiscal mandate", to be on course to balance the budget over a rolling five-year period, is also in jeopardy.

If the current weak growth and low tax receipts are permanent, the Chancellor will need another £23 billion of tax rises or spending cuts to be on course to meet his mandate by 2018, the report said.

The think-tank said this would be "roughly equivalent to increasing the main rate of VAT from 20 per cent to 25 per cent", or imposing even deeper welfare cuts than announced so far.

Mr Osborne will deliver his Autumn Statement on December 5.

David Cameron will join the Chancellor today for talks with Nick Clegg and Danny Alexander, the Lib Dem chief secretary to the Treasury, to agree the key announcements before details are set to the government's independent forecasters at the Office for Budget Responsibility this week.

A Treasury spokesman said: "Action taken by the Government has cut the deficit by a quarter, whilst over a million new jobs have been created in the private sector, inflation is down, and the economy is healing.

"Britain still faces economic challenges at home and abroad but the Government is taking the tough decisions needed to deal with our debts and equip our economy for the global race."