The bombshell will come as a boost to Labour ahead of conference season.
The bombshell will come as a boost to Labour ahead of conference season
The Conservatives will have to raise taxes or make even bigger cuts to spending than already proposed if they win power next year, according to the respected Institute for Fiscal Studies (IFS).
In its latest observation, the independent research body noted that meeting the Conservatives’ fiscal target “would require tax rises or significantly greater cuts in public spending than Labour and the Liberal Democrats would require to meet their rules – on top of those that are already planned up to 2015–16”.
Today’s IFS observation stated:
“The latest forecasts for the public finances imply further deep cuts to public service spending, which have not yet been set out in any detail. To achieve the currently forecast levels of borrowing, without any further tax increases or cuts to welfare spending, the government would need to cut spending by government departments by a further 10.6% in real terms (or £37.6 billion) between 2015–16 and 2018–19. This is on top of the £8.7 billion cut that has already been set out for 2015–16.”
But the IFS added that “Meeting the Conservatives’ target could result in debt falling more quickly than would be the case under the rules proposed by Labour or the Liberal Democrats”.
The IFS concluded that borrowing over this parliament was “on course to be substantially greater than the Office for Budget Responsibility (OBR) forecast back in June 2010”. Although it concluded that “additional spending cuts pencilled in for the next parliament are sufficient for the latest official forecasts to suggest that the fiscal mandate is being met”.
Meanwhile it said the government’s supplementary target debt was on course to be missed (George Osborne’s ‘supplementary target’ aims to see public sector net debt falling as a share of GDP by 2015-16):
“Although borrowing is forecast to fall over the coming years, the OBR still expects public spending to exceed public revenues by a significant margin in the next few years and so the stock of public debt will continue to grow more quickly than the economy. As a result, the OBR forecasts that debt will rise from 77.3 per cent of national income in 2014–15 to 78.7 per cent in 2015–16, before falling slightly to 78.3 per cent in 2016–17.”
The IFS also says that Labour could cut taxes or increase spending in government unless Labour seek to deliver as large a budget surplus as the Conservatives:
“The OBR’s latest forecasts also suggest that Labour could operate somewhat looser fiscal policy than current government policy and still achieve their target of debt falling within the next parliament, since the latest forecasts are for debt to fall from 2016–17 onwards.”
The bombshell will come as a boost to Labour ahead of conference season. The three major parties are all committed to deep spending cuts after next year’s General Election, but the IFS have made clear that under a Conservative government the cuts will be deeper – unless they are offset by significant tax increases.
Fortunately for the Tories, today is probably a good day to bury bad news.Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.