JUST when politicians are claiming the economy has turned a corner, we are being told to brace ourselves for the worst of the UK’s spending cuts.
The Institute for Fiscal Studies (IFS) said that its Green Budget, considering financial options ahead of next month’s Budget, reveals the UK’s finances still have “a long way to go”.
BBC Business reports that to meet plans announced in Chancellor George Osborne’s Autumn Statement departmental spending cuts of £51.4Bn, or 14.1%, are needed in the next parliament, according to the IFS.
Cuts in the current parliament are expected to reach only £38.3Bn, or 9.5%.
The IFS said that over the next four years the UK is planning the largest fiscal consolidation out of 32 advanced economies.
The public finances have a long way to go before they finally recover from the effects of the financial crisis
It would mean public spending falling to its lowest share of national income since at least 1948, and fewer people working in the public sector than at any time since at least 1971.
Paul Johnson, director of the IFS, said: “Mr Osborne has perhaps not been quite such an austere chancellor as either his own rhetoric or that of his critics might suggest.
“And he has cut departmental investment spending by only half as much as he originally planned.
“The public finances have a long way to go before they finally recover from the effects of the financial crisis.
“One result is that he or his successor will still have a lot of fiscal work to do over the course of the next parliament.”
The report said that the high deficit of more than 5% of national income, and total debt of more than 80% of income, is because of poor economic performance at the start of this parliament.
Yet it says that the three main UK parties could all cut spending by less than is implied by Autumn Statement plans and still hit fiscal targets.
The Conservatives would need to reduce departmental spending after 2015/16 by 6.7% (£24.9Bn).
And Labour and the Liberal Democrats would need to impose departmental spending cuts of 1.4% (£5.2Bn) and 2.1% (£7.9Bn) respectively to be consistent with their fiscal targets and stated intentions on tax and benefit policy.