Fears of more cuts and tax rises after next election

UK Political Editor

Friday 22 March 2013

MILLIONS of Britons should brace themselves for yet more severe spending cuts and tax rises after the 2015 General Election, a leading think-tank has warned.

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MICHAEL SETTLE UK POLITICAL EDITOR

The Institute for Fiscal Studies (IFS) calculated the next UK Government might have to undertake £12 billion of tax rises or welfare cuts to avoid even deeper reductions in public service budgets.

Commenting on George Osborne's Budget, the think-tank criticised the Chancellor for wasting public money by "massaging" spending plans to avoid the embarrassment of a rising deficit.

The IFS's view came as Shadow Chancellor Ed Balls claimed the Coalition's Help to Buy scheme could be used by better-off people to buy second homes. But Danny Alexander, Chief Secretary to the Treasury, defended the scheme, saying it was to help first-time buyers get on the housing ladder. In its post-Budget analysis, the IFS noted how with health, schools and overseas aid ring-fenced from cuts at least until 2016, the prospects for unprotected areas like law and order, defence, justice and transport looked grim.Paul Johnson, the think-tank's director, warned Mr Osborne's decision to spend £5bn on capital projects, childcare and social care, coupled with the increase in income tax allowances and cuts to beer and fuel duties and corporation tax, "leaves even less for everything else".He noted how the tighter fiscal conditions expected after the 2015 election came against a "desperately disappointing" forecast on the deficit, with the Chancellor due to borrow £70bn more in 2014/15 than he had originally hoped.The IFS also identified an unfunded net tax cut of £3bn for 2015/16 in Osborne's plans, and said Whitehall departments would have to absorb the impact of an increase in National Insurance payments due to changes in the pension system, estimated at £3.3bn.This, Mr Johnson said, pointed to a "cut in real resources going to public services" after the election, unless the Chancellor took the alternative option of tax hikes, which now looked "more likely than not".The IFS chief added: "The implication is that the real effect of public spending cuts pencilled in for the next parliament will be even more severe than expected hitherto."Add to that the fact we are promised more capital spending, more spending on social care and a more generous childcare subsidy – within an overall spending envelope that has not been expanded – and the outlook for all other unprotected spending looks grim."Mr Johnson was also critical of the Government's decision to squeeze departmental spending in the first two months of this year and delay some major payments to ensure that borrowing for 2012/13 went down by the narrowest of margins compared to last year – down from £121bn to £120.9bn.He said: "There is every indication that the numbers have been carefully managed with a close eye on the headline borrowing figures for this year."It is unlikely that this has led either to an economically optimal allocation of spending across years or to a good use of time by officials or ministers."

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Fears of more cuts and tax rises after next election

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