Public spending will have to fall by £60bn a year if the Government wants to balance the books without making a U-turn on its tax cuts, the Institute for Fiscal Studies has warned.
In their annual “green budget”, the researchers warned of extreme uncertainty in Britain’s public finances as a result of the volatile global economy.
Under their central projection, the amount of “fiscal tightening” – tax cuts or spending reductions – needed to stop Government debt rising as a proportion of GDP within five years is £60bn, more than the entire schools budget of England. The IFS said that a promise to close the gap solely through spending cuts “risks stretching credulity to breaking point”. It would mean reducing all day-to-day spending other than defence and the NHS by 15 per cent, even if the Government also capped investment to 2 per cent of GDP and restricted benefits increases to the rate of wage growth rather than inflation.
Mr Johnson said: “It is just about possible to see how Mr Kwarteng could get debt on a stable, or ever-so-slightly falling, path in the final year of his forecast. He could, for example, announce some combination of cuts to working-age benefits and capital investment, plus some unspecified cuts to public services pencilled in for the years after 2025.
“That might work on paper and spare him having to row back on any more of his mini-Budget tax cuts. But the specifics of the UK Government’s fiscal strategy are under more scrutiny by financial markets than at any point in the recent past.”from the Bank of England, saying: “In current circumstances, the contradictory position of monetary and fiscal policy is an error. At best we think this means bruising increases in unemployment.
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