The Institute of Fiscal Studies, (IFS) has said that more spending cuts lie ahead for the UK. In its Green Budget, published ahead of next month’s Budget, it says that the UK economy still has a long way to go and that many more spending cuts are needed.
Government departments must save a total of £51.4 billion or 14.1 per cent of their overall budget during the next Parliament. Cuts for the current Parliament will reach £38.4 billion or 9.5 per cent by the time Parliament is dissolved prior to the general election in May.
According to the IFS, the UK is making more spending cuts than any of the other 32 advanced economies. Public spending will fall to its lowest as a proportion of the national income since 1948. There will be fewer people working in the public sector than before 1971.
The IFS report is positive in its summary of the UK economy, predicting zero inflation and growth of 3 per cent in 2015.
Senior economist at Oxford Economics, Andrew Goodwin, co-wrote a chapter of the Green Budget. He said that the prognosis for the British economy was very good and that household finances were likely to improve dramatically for many during 2015.
Paul Johnson, IFS director, said that spending cuts have so far been fewer that George Osborne’s rhetoric implied. Spending on social security has not been reduced and both capital spending and departmental investment spending have only been cut by half as much as originally planned. As a result, George Osborne or his successor will have much to do during the next parliament if public finances are to recover fully from the financial crisis of 2008.
The IFS report cited the poor performance of the economy at the start of this parliament in 2010 as the cause of the current high deficit.
