5th December 2014
Britons are facing ‘colossal’ spending cuts over the next five years in order for the country to ditch the deficit and get back into the black.
Delving into the numbers after the Autumn Statement, the Institute for Fiscal Studies (IFS) warned that nobody should be fooled by chancellor George Osborne’s spending giveaways as they masked years of pain ahead.
‘Over the past few days you might have been forgiven for thinking that there was to b some kind of spending dividend to come,’ said Paul Johnson, director of the IFS. ‘More money announced for the NHS, much made of how transport and flood defence spending is to be allocated. That is not the story the numbers tell.’
He said there is a slight increase in the speed of proposed spending cuts after 2015/16 and there will be continued cuts in public service spending.
‘There is no spending dividend on the horizon. Far from it. There are huge cuts to come…whatever way you look at it, we are considerably less than half way through the cuts,’ said Johnson.
Deeper and faster cuts are needed in order to put the deficit reduction back on track – the deficit fell by just £6 billion this year to £91 billion, half the amount it was expected to fall by. The falls were due to reduced tax revenue taken by the Treasury, which was £8 billion lower than forecast.
‘It is important to understand why the deficit hasn’t fallen,’ said Johnson. ‘It is emphatically not because the government has failed to impost the intended spending cuts. It is because the economy performed so poorly in the first half of the parliament, hitting revenues very hard.
‘Unless the government could have found some economy magic which would have made a substantial difference to growth over the last few years, the only way it could have presided over a greater fall in the deficit would have been to cut spending or to raise taxes further.’
In order to reach a surplus of £23 billion in 2019/20 as predicted by Osborne, Johnson said there was only one solution.
‘How do we get to this sunlit upland in which we have a budget surplus? Spending cuts on a colossal scale is how, taking total government spending to its lowest level as a proportion of national income since before the last war,’ he said.