Government less than half way through cuts programme
- Published on Wednesday, 05 February 2014 11:49
- Written by Daniel Mason
The government is less than half way through its programme of austerity measures, the Institute for Fiscal Studies said today.
Publishing its annual Green Budget, the IFS warned that new spending commitments, as well as the growing and ageing population, would put extra pressure on the public purse.
"Returning growth, and forecasts suggesting we should be running a budget surplus by 2018-19, should not lull us into a false sense that all is now well with the public finances," said IFS director Paul Johnson.
According to the report, just 40 per cent of proposed spending cuts will be in place by the end of this financial year.
The think-tank said chancellor George Osborne's plans implied cuts of more than 30 per cent since 2010 across departments other than health, education and international aid, which the government has ring-fenced.
New government spending commitments of more than £6bn after 2015-16 would lead to additional cuts elsewhere, the report said.
It means public spending is set to fall 1.7 per cent each year between 2010 and 2018. But with population growth of 3.5 million over the same period, public spending per person will drop 2.4 per cent annually.
The IFS added that rising demand on the NHS meant that, even if the health budget is frozen in real terms, health spending per person will be 9 per cent lower in 2018-19 than when the coalition government came into office.
And despite the plans for a budget surplus in 2018-19, public debt will still be 76 per cent of GDP in that year, with interest payments accounting for 4 per cent of national income, the study said.
"The outstanding debt will still be very large and the scale of additional spending cuts required to hit that budget surplus remains hugely challenging, especially on top of cuts already delivered," said Johnson.
Meanwhile the report noted that there was no clear evidence of a housing bubble in the UK – with house prices still 25 per cent below their previous peak nationally, and 17 per cent below peak in London.