Endless austerity: £55bn ‘colossal cuts’ loom, Institute of Fiscal Studies warns
The IFS report claims only £35 billion (around US$55 billion) of cuts applied under the coalition’s austerity agenda have been made to government departments, which accounts for less than half of the total necessary to eliminate the budget deficit. A further £55 billion worth of cuts will be necessary before 2020, the report warns.
The figures projected by the IFS follow the revision of the UK’s borrowing figures from the Office for Budget Responsibility (OBR). In the run up to the Autumn Statement, the OBR said the UK would borrow a total of £75 billion more than previously estimated to aid the ailing economy.
If departmental cuts continue at the same pace, the government will need to raise taxes or cut welfare by £21 billion by 2020, Director of the IFS Paul Johnson said.
Johnson said for the government to achieve the OBS £23 billion budget surplus by 2020, it would require “spending cuts on a colossal scale ... taking total government spending to its lowest level as a proportion of national income since before the last [world] war.”
“So there is no spending dividend on the horizon. Far from it. There are huge cuts to come. On these plans, whatever way you look at it, we are considerably less than half way through the cuts,” he added.
Johnson further argued it was not from lack of governmental effort that the deficit hadn’t fallen. Rather it was “because the economy performed so poorly in the first half of the Parliament, hitting revenues very hard.”
The IFS figures show that public expenditure is down by £11 billion over the four years to 2014/15, but it is set to continue dropping by a further £38 billion in the five years to 2019/20.
Johnson made it clear the cuts should not be labeled “unachievable,” claiming “if we move in anything like this direction, whilst continuing to protect health and pensions, the role and shape of the state will have changed beyond recognition.”
“We think that on the plans set out yesterday by 2019-20 a third of all state spending will go just on health and state pensions, up from a quarter not long before the crisis. And that’s without any additional spending being allocated to the NHS,” he added.
Johnson defended the chancellor, saying he had proved it was possible to implement large-scale cuts.
The bleak IFS report came only hours after Osborne protested on the BBC, calling media coverage of spending cuts “hyperbolic.”
“I would have thought the BBC would have learned from the last four years that its totally hyperbolic coverage of spending cuts has not been matched by what has actually happened. I had all that when I was interviewed four years ago and has the world fallen in? No it has not,” he said.
Osborne further said, “I’m not pretending these are easy decisions or that they have no impact.”
“But the alternative of a return to economic chaos, of not getting on top of your debts, of people looking at Britain across the world and thinking that is not a country in charge of its own destiny, is not a world that I want to deliver,” he added.