Worst cuts yet to come, warns Institute for Fiscal Studies

Britain faces at least five years of savage pending cuts if deficit reduction plans announced by chancellor George Osborne are enacted, according to the respected Institute for Fiscal Studies (IFS).

Britain faces at least five years of savage pending cuts if deficit reduction plans announced by chancellor George Osborne are enacted, according to the respected Institute for Fiscal Studies (IFS).

Speaking the day after the chancellor delivered his Autumn Statement, director the the Institute for Fiscal Studies Paul Johnson said the “relatively easier cuts” had already been made and that departmental cuts of “up to 50 per cent” may be required to balance the books.

He told the Today programme on BBC Radio 4:

“The scale of the cuts has been added to by one year further. We are looking at a world in which only about 40 per cent of them have been carried out in this Parliament, with 60 per cent to come. Cuts of up to 50 per cent per head in some of those non-protected department. Not even very close to halfway there.

“If you look at the non-protected departments if all of these cuts go all the way through, those are cuts of half or indeed more on average over the whole period. I think that’s one of the challenges for the government.

“It’s no is no good us saying ‘this is a very big number, you can’t do it.’ The chancellor has quite reasonably pointed out people said back in 2010 what was intended over this parliament was very big and very challenging. He’d say we’ve managed to deliver those cuts and we’ve more than delivered those cuts.

“Even if it has not been too difficult over this period, that doesn’t mean it won’t be difficult over the next period.

“Apart from anything else, they have done the relatively easier things first. And, of course, we’ve actually had a relatively easy environment for doing it. Private sector wages have been very weak, which has made it relatively easy to keep public sector wages down. If private sector wages start to grow, as we hope they will, it will be much harder to keep public sector wages down.”

The IFS’s comments come on the back of a warning from the Office for Budget Responsibility (OBR) that public spending would fall from £5,650 per head in 2009-10 to £3,880 in 2019-20. It added that public services spending as a share of GDP would be at a level not seen since the late 1930s.

Because George Osborne’s deficit reduction plans faltered in the first half of this parliament (largely because the economy wasn’t growing and therefore tax revenues were poor) over half (60 per cent) of the chancellor’s total spending reduction is forecast to occur in the next parliament.

Meanwhile Lib Dem business secretary Vince Cable accused the Conservatives of wanting to reduce the deficit “brutally”, adding that Osborne’s plans were “simply not realisable”.

According to the OBR’s distributional analysis of the chancellor’s Autumn Statement (see chart), the top 10 per cent are set to lose out the most from proposed tax and benefit changes. However the poorest are also being hit hard, largely due to changes taking place in the benefits system.

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