Pay squeeze and tax rises needed in UK to fill £40bn hole in public finances

Weak growth and pressure on NHS and welfare budgets will add to Covid woes, warns IFS thinktank

Britain's struggle to emerge from the Covid-19 pandemic will result in pay packets being squeezed and taxes rising to fill a 40bn hole in the public finances, two leading thinktanks have warned.

Despite record peacetime borrowing of 394bn this year, the Resolution Foundation and the Institute for Fiscal Studies said the run-up to the next general election would be marked by a hit to earnings and pressure on the government to balance the books.