A significant increase in taxes is inevitable over the course of the next decade, regardless of the outcome of the General Election, a new report has warned.

The research, conducted by the National Institute of Economic and Social Research (Niesr), suggests that in order to reduce the budget deficit below 3% by 2020, the incoming Government would need to impose tax rises equal to a 6p increase in the basic rate of income tax.

Predicting sluggish economic growth of 1% this year and 2.25% in 2011, Niesr has also forecast that unemployment will reach a peak of 2.7 million in 2011.

The organisation has called on the next Government to cut the deficit by an additional 2% of GDP once a sustained recovery is underway, but warned that making significant cuts to public spending now would cost jobs and reduce growth by 0.1 to 0.2% this year, threatening the recovery.