"Era of high taxes on the horizon"

TAXES will rise steeply in the coming years and there is a danger of the pound being devalued, according to an economic expert.

Speaking at an event organised by Barclays Wealth at the Concorde Conference Centre at Manchester Airport, author and economist Philip Coggan said uncertainty would surround the economy during 2010.

Mr Coggan was joined on the panel by entrepreneur Tom Bloxham, chairman of Manchester property company Urban Splash for a debate chaired by journalist and political commentator Andrew Neil.

The key issues highlighted in “The Year Ahead, 2010” debate included the general election, the possibility of the UK losing its AAA credit rating, the lack of confidence in the consumer markets, and fear of a second sharp economic downturn.

Mr Neil said: “From the Chancellor down there is a uncertainty among a lot of people about 2010. There are deep worries about a weak Quarter One.

“We saw how fragile the recovery is with the events in Dubia sending the markets into freefall for 24 hours. We still don’t know the amount of toxic waste on the banks’ balance sheets; lending between banks is still weak as is the lending to businesses.”

Mr Coggan, capital markets editor at The Economist, was not much more upbeat, likening the economy to a “heart attack patient” – which while no longer at death’s door still  needs to be weaned off the live-saving drugs.

“We have an global economy that has been propped-up by the governments, and the danger is that if they let go it will slump.”

Mr Neil said the country was now in an era where the “politics of debt” would prevail and suggested that whichever party wins next year’s General Election would be in receipt of “a hospital pass” – such is the poor state of the economy.

Mr Neil and Mr Coggan told the audience of around 150 they expect VAT to rise to 20% in the next two years, that the 50% tax rate would stay, capital gains tax would rise and the 40% pensions relief would be scrapped.

Mr Coggan said a loss of the UK’s AAA credit rating could trigger a devaluation of the pound, which was the “road to ruin” for our economy.

He said a possible hung parliament and a prolonged period of economic uncertainty would affect the UK’s credit rating, which could then spark a sell-off of the pound by international investors.

Mr Bloxham – who was by far the most optimistic of the panellists – agreed that “we are living in strange times”, and that his industry and business has had a torrid time.

He said: “I think the recession has presented opportunities – to get back to basics – to get closer to your customers, to innovate.

“The boom in the economy we saw in the last few years saw some bad developers arrive on the scene and the recession has thrown them out.”

He said the future for Manchester was promising, with an economy based on ideas, allied closely to the education sector.