If Osborne's new plans to meet fiscal targets were to be implemented, public spending would hit lowest level since 1948
Despite cuts in working-age benefits, there has been ‘no real reduction in spending on social security’ over this parliament. This is what the IFS has stated today in its Green Budget, alongside warnings that the Tories’ planned cuts would not significantly reduce social spending.
The IFS finds that the Conservative’s planned two-year freeze for all non-disability benefits for those of working age would reduce spending by less than £2.5 billion. To achieve a £13 billion cut in spending, that would mean freezing all other benefits and tax credits (excluding state pensions) for the entire duration of the next parliament.
This equates to taking an average of £800 a year from 16 million families.
The Green Budget also estimates that under current policy, fiscal drag would cause the number of families losing some or all of their child benefit to more than double over the next ten years.
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. He deliberately allowed the forecast deficit to rise as growth undershot in the early years of the parliament.
“He has not cut spending in real terms as much as planned, as inflation has undershot. And he has cut departmental investment spending by only half as much as he originally planned. 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 public finances have a long way to go before they finally recover from the effects of the financial crisis.”
IFS analysis suggests that the UK is planning the biggest fiscal consolidation out of 32 advanced economies over the next five years; this is because the deficit remains at 5 per cent of national income.
Almost all of the remaining consolidation is planned to come from spending cuts. If the plans Osborne laid out into the Autumn Statement were implemented, we would see public spending falling to its lowest level since 1948, and fewer people working in the public sector than at any time since 1971.
The IFS finds that the three main parties could all meet their fiscal targets by cutting the budget by less than planned in the Autumn Statement, although they say that continuing with Labour’s planned budget throughout the 2020s would result in debt falling by only nine per cent of GDP, compared to 19 per cent with the Tory budget.
The report also warns that rises in tax could be a possibility for any government that comes in after May’s election: a new government could raise around £5 billion by increasing the main rates of income tax by 1 per cent.
“A government looking to raise more tax revenue overall from the very well off might look at extending the reach of inheritance tax or capital gains tax, perhaps abolishing some existing reliefs.”
Ruby Stockham is a staff writer at Left Foot Forward. Follow her on Twitter
14 Responses to “UK government planning biggest fiscal consolidation of 32 advanced economies, says IFS”
Selohesra
Perhaps a truer headline could be taken from Johnson’s quote “Mr Osborne has perhaps not been quite such an austere chancellor as either his own rhetoric or that of his critics might suggest”
Might have been better if we had seen some real cuts but given the pain broadcast by BBC from day 1 of the coalition (despite there being b*gger all diff between Labour & Tory spending plans) – they would never have been allowed to try it
madasafish
It just puts into context that those who are shouting “austerity” are either liars or dumb because the reality is that Government spending is rising….And anyone who believes the shouts of “austerity” obviously believes politicians.. which is even dumber.
Austerity is cutting pensions, closing hospitals and schools etc. None of that has happened.. despite what Balls and Miliband tell us. (Let alone Osborne!) But Balls of course is the man who always wrong.
Selohesra
You’ve changed the headline now 🙂
Dave Stewart
Actually there have been huge cuts to spending. Particularly on the welfare budget however because of the poorly thought out way this has been done and because the causes of the rising welfare budget haven’t been addressed we have seen a rise in welfare spending. This is a result of more people become dependant on the state to get by for instance because of rising unemployment (early in this parliament) and because of the ever increasing cost of housing which has resulted in many more people needing to claim housing benefits. Also the explosion in low wage insecure work (which accounts for approximately half of all jobs created since 2008) many more people are dependent on in work benefits. This is what has kept the deficit high despite the fact that our public services have been starved of funds and the value of benefits that people can claim has fallen (in some cases dramatically).
Rather than address the route cause of these problems, low paid insecure work and rising housing costs among others, to lower the cost of the welfare budget the government has targeted those in receipt of welfare while continuing to pour money into the pockets of private interests in the form of housing benefit payments and the low wage subsidies to businesses that are in work benefits.
To claim there has been no austerity is to stick your head in the sand and ignore what is going on around. There has been austerity, the problem is it has failed even by it’s own terms as many predicted it would.
littleoddsandpieces
…To achieve a £13 billion cut in spending, that would mean freezing all other benefits and tax credits (excluding state pensions) for the entire duration of the next parliament. …
The state pension is not a benefit and has never been a benefit, but a conditionality pension that is compulsory with the government, based on your National Insurance record. Up to next year you could get a pro rata state pension after 1 year NI record, but this raises to NIL state pension for 10 years or less NI record.
The state pension is all but abolished by the flat rate pension, with people already getting official government forecasts as low as £55 per week with no tops up from SERPs / S2P and Pension credit – savings abolished for new claimants 2016 and guarantee credit greater complex conditionality, even to current pensioners).
Huge numbers of men and women will get NIL STATE PENSION.
See why under my petition, in my WHY THIS IS IMPORTANT section, at:
https://you.38degrees.org.uk/petitions/state-pension-at-60-now
Sign that petition so that the flat rate pension is included in the original petition I signed about the loss of state pension by raised retirement age that breached a Coaliton election promise from 2010:
https://you.38degrees.org.uk/petitions/revert-to-the-governments-promise-regarding-no-increase-in-the-state-pension-age-until-2016-2012
The state pension with SERPs could be a flat rate of £113.10 per week basic state pension plus about £165 from the additional top up to the state pension of SERPs that was called the State Second Pension from 2002.
Opting out of SERPs has been mis-sold as it now vastly reduces or wipes out your NI record.