LONDON, Jan 28 (Reuters) - Britain will need to raise taxes or cut spending by an additional 20 billion pounds by 2015 to put the public finances back on track, the Institute of Fiscal Studies said on Wednesday.
The think tank said that even with these measures, public sector debt may take more than 20 years to return to levels seen before the credit crisis.
Without any such fiscal tightening, the IFS calculated that public sector net debt could rise to more than 60 percent of GDP, from where it would decline only gradually over subsequent decades.
The think tank noted there was a danger that even more radical fiscal tightening may be required if investors' appetite for gilts diminishes.
"There is clearly a danger investors will take fright at the state of the UK public finances, pushing up gilt yields," it said. "If borrowing costs were to return to the average levels of the 1990s, then further tax increases or spending cuts would probably be required to stop debt and debt interest costs rising unsustainably."
In November's pre-budget report, the government signalled spending cuts and tax increases starting in 2010/11 and raising 2.6 percent of national income by 2015/16.
The study calculates that if the public finances evolve as the government hopes, this tightening would have to remain in place until the early 2030s before debt returned to below 40 percent of national income -- the ceiling Prime Minister Gordon Brown set as one of his two fiscal rules when he was finance minister in 1997.
"There is no prospect of a government being able to readopt these rules any time soon," the study concludes.