A LEADING think tank has warned that George Osborne’s Autumn Statement does not signal the end of austerity.
The Institute for Fiscal Studies (IFS) said the review was one of the tightest in post-war history, with expenditure due to fall from 40.9 per cent of national income in 2014-15 to 36.5 per cent in 2019-20.
It said a swathe of departments would see real-terms cuts.
“The three per cent cumulative increase in health spending over the next five years is not far off the average annual increase in spending in the last 50 years,” said IFS director Paul Johnson.
“On the other hand there is no question that the cuts will be less severe than implied in July. The gap with what one might have expected based on the Conservative manifesto is substantially greater.”
Johnson added Osborne had “banked” some changes in forecasts for lower debt interest payments and higher tax revenues, and that by adding some tax increases he had made some of his own luck. However, he added the Chancellor would need his luck to hold out.
The Chancellor had set himself a completely inflexible fiscal target to have a surplus in 2019-20,” he said. “This is not like the friendly, flexible fiscal target of the last Parliament which allowed him to accept a bigger deficit when growth and tax revenues disappointed. This is fixed four years out."
On the devolved governments of Scotland, Wales and Northern Ireland, Johnson said a flaw in Barnett was being fixed, although there was “an increasingly urgent need” to work out the fiscal framework for the newly devolved UK.
He added: “We still don’t know how devolution to Scotland will work in practice and what (necessary) compromises to the mutually incompatible principles laid down by the Smith Commission will be made.”
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