Cuts to public service spending are set to accelerate over the next few years as the UK government attempts to combat the budget deficit, according to the Institute of Fiscal Studies (IFS).
An increase in taxes is also expected before 2020 thanks to downgrades in GDP growth over the next few years.
Slow economic growth after Brexit, low levels of business investment and weak productivity growth were all blamed for the UK’s economy’s weak outlook by the IFS. As a result, public finances are set to be £13bn ($16.2bn) worse off in this financial year than predicted.
At an event in London, the organisation announced its annual report of the economy.
The institute’s director Paul Johnson said that austerity is set to carry on in Britain.
“For all the focus on Brexit, the public finances in the next few years look set to be defined by the spending cuts announced by George Osborne.”
“Cuts to day-to-day public service spending are due to accelerate while the tax burden continues to rise. Even so the new chancellor may not find it all that easy to meet his target of eliminating the budget deficit in the next parliament,” Johnson added.
“Even on central forecasts that is going to require extending austerity towards the mid-2020s. If the economy does less well than hoped we may see yet another set of fiscal rules consigned to the dustbin.”
The IFS has said that about £17bn of tax rises are planned over this parliament, which will push the tax share of GDP above 37 percent of national income for the first time since Thatcher’s governments.
Departmental spending is expected to be 13 percent lower than it was in 2010 by the end of this current term, which could lead to severe cuts to social care and schools. This could prove controversial as education was protected, alongside health and pension spending, until this year.
The IFS said: “Public spending, especially on health, pensions and overseas aid will be higher as a share of national income than in 2007-08, while spending on schools, defence and – in particular– public order and safety will be lower.”
Eliminating the deficit in the next parliament won’t be an easy task also, the institute warned, as a consolidation worth £34bn may be required.
Free download worth over $5000Download our 2019 Technology, Media and Telecoms Predictions Report
In this report, we look at the 30 big tech themes for 2019, identifying winners and losers for each theme. This report will impact all industries helping:
- CEOs/Senior Staff: in all industries understand the disruptive threats to their competitive landscape
- Investors: Helps fund managers focus their time on the most interesting investment opportunities in global TM