Politics

The government does not have the money to end austerity

Experts said the government hasn't saved enough on cuts – so expect more to come

Expert analysis of the government purse has revealed that Chancellor Philip Hammond would need to come up with £11bn more than cuts have already saved the government if it is to curb austerity.

The Institute for Fiscal Studies (IFS) report, published ahead of next month’s Spending Review, said cuts to public services are likely to continue.

Hammond has not yet said how the government budget will be split between services. But the IFS said it could be announced in the Spring Statement on 13 March, and that it may well be “one of the most important non-Brexit policy decisions to be made in the current parliament”.

The study laid out how plans set in the Autumn 2018 Budget will lead to cuts in day-to-day spending on public services outside of health, defence and overseas aid.

Those budgets have already faced cuts of £40bn since 2010.

However the study did say future cuts would likely be smaller in scale than those already made – averaging 0.4 per cent a year going forward, compared to 3 per cent a year since 2010.

The report went on to suggest that even small savings would be difficult to come by for the Chancellor because of how far services have already been scaled back.

Researchers emphasised that leaving the EU without a deal next month will guarantee slowed economy growth and, in turn, lower spending and higher taxes.

Even if the government briefly spends more to mitigate some of the effects of a no-deal Brexit, a return to austerity would be inevitable.

Ben Zaranko, a research economist at the IFS and an author of the report said: “The Chancellor needs to decide what period the next Spending Review should cover and what funding to make available to it.

“The Government has already committed to increase day-to-day NHS spending by £20 billion over the next five years. Even though the latest plans have overall day-to-day spending increasing over that time, these increases wouldn’t be enough even to cover the NHS commitment in full.

“This suggests yet more years of austerity for many public services – albeit at a much slower pace than the last nine years. And while an economically bad Brexit would likely mean lower spending in the longer term, if anything it might require additional spending over the next few years.”

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