Austerity to continue unless Hammond spends, says IFS

12 Février, 2019, 04:06 | Auteur: Auguste Feret

The Chancellor needs to find another £5bn a year if he wants to fund the Government's promise to "end austerity", analysts at the Institute for Fiscal Studies will warn today.

Philip Hammond must find an extra £5bn in this year's Whitehall spending review to reverse planned cuts and meet his claim of ending austerity, a leading thinktank has revealed.

The Treasury says long-term funding decisions will be made later this year.

The IFS said spending increases already promised by the Chancellor would be swallowed up by commitments to fund the NHS, defence and worldwide aid - potentially meaning cuts to other areas.

"This would outstrip population growth, putting per capita spending on an upward trend".

"This would slow the pace of the cuts experienced by those areas since 2010, but would by no means represent an "end to austerity". And defence and foreign aid spending are protected.

Richard Watts, the leader of Islington council and chair of the Local Government Association's resources board, said: "If the government fails to adequately fund local government in the spending review then there is a real risk to the future financial viability of some services and councils".

"Outside the NHS, total day-to-day departmental spending is now set to grow in line with inflation, and public investment will reach levels not sustained in 40 years in this parliament". To do so he would have to raise taxes, cut other spending or borrow more.

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But any boost to spending would be temporary, and further austerity would eventually be required, the think tank said.

Ben Zaranko, a research economist at the Institute for Fiscal Studies and an author of the report, said there could be more years of austerity for many public services.

But he said it would be 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".

In an analysis of the choices facing the Chancellor in this year's spending review, the IFS said Mr Hammond would need to spend £11 billion to avoid it falling as a share of national income.

"This could be the most important announcement in next month's Spring Statement".

Mr McDonnell said: "Nine years of brutal Tory austerity have wounded our public services and the whole country which relies on them".

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