New call for massive UK tax increase: 'Britain needs extra 6p in the pound to tackle ballooning national debt'

Taxes could rise by six pence in the pound over the next 10 years to slash public borrowing, an economic forecaster warned today.

Although cuts and a public sector pay clampdown will halve the UK's deficit over the next five years, the National Institute for Economic and Social Research (NIESR) said more action is needed to reduce borrowing to below 3 per cent of GDP by 2020.

'We assume it is achieved through income taxes rising by an equivalent of six pence in the pound on the basic rate,' NIESR said.

The prediction comes as the three main political parties have come under fresh pressure to explain exactly how they propose to reduce Britain's ballooning public debts.

Chancellor Alistair Darling on the campaign trail in Dumfries town centre yesterday

It also comes after it was revealed that Bank of England boss Mervyn King had warned that whichever party wins the election, it will be forced to impose such severe spending cuts and tax rises that it will be kicked out of power 'for a generation.

The basic rate of income tax is currently 20 per cent after Gordon Brown cut the rate in one of his last acts as Chancellor in 2007.

VAT has been seen as a likely target for a tax hike after the election, although NIESR said VAT receipts would be held back by weak spending and higher saving.

The organisation is also calling for a further tightening of the public finances equivalent to 2 per cent of national output, saying the current debt mountain amounts to 'unfair treatment of our children'.

'Large government debts should exist only after wars and crises. After the crisis is over we have to rebuild the shock absorbers to prepare for the next one,' it added.

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A long way to go: How the 2008 recession compares to previous economic downturns

NIESR said public sector wages would fall by almost 1per cent a year for the next five years, with taxes on household incomes set to rise by around 1per cent of GDP over the course of the next Parliament.

But its forecasts estimate the direct tax take would have to rise by around 1.25 per cent of national output by 2020 - almost £18 billion at today's prices - to begin to pay down the debts built up in the recession.

Although the UK is gradually pulling out of the slump with two successive quarters of modest growth, NIESR expects unemployment - currently 2.5 million - to peak at 2.7 million next year.

The UK economy will crawl ahead by 1per cent this year and 2per cent in 2011, it added.

Last week NIESR said UK output grew at 2 per cent a year on average under Labour, compared with 2.2 per cent from 1979 to 1997 under the Conservatives.

But after adjusting for population growth, it added that the country had risen to second place in the G7 ranking of national growth rates after being third between 1979 and 1997.

Tax experts at Deloitte said an average earner on £25,000 a year would pay more than £1,100 extra if income tax rose by 6p in the pound.

Based on figures for the current tax year, an average earner pays £3,705 in income tax at 20 per cent - but this would rise to £4,817 at 26 per cent, Deloitte said.

Earlier this week the influential think-tank Institute for Fiscal Studies (IFS) put out a report stating that voters were not getting sufficient details on how the Tories, Labour and Lib Dems would account for their deficit strategies.

The IFS believes that by 2014-15, the Conservatives would need to find cuts of nearly £64 billion a year, Labour almost £51 billion and the Liberal Democrats almost £47 billion to be in line with their plans.