Spending Review: Treasury will need to find £5bn to ease austerity, says IFS

Spending Review: Treasury will need to find £5bn to ease austerity, says IFS

New analysis by the Institute of Fiscal Studies has found that the Treasury will need to find an extra £5bn by 2023-24 to spare further cuts to public services.

Chancellor Philip Hammond is yet to confirm how much money is to be allocated among departments at his forthcoming Spending Review,due to be published next month.

Quoting the Treasury’s provisional plans in the Autumn 2018 budget, the IFS estimated that departments, excluding health, defence and aid, face more cuts under the Government’s spending plans.

The IFS research, funded by the Economic and Sovial Research Council, was launched at a joint breifing with the Institute for Government, and stated that maintaining spending on unprotected services as a share of national income would require £11 billion on top of the plans set out in the last Budget.

Ben Zaranko, a research economist at the Institute for Fiscal Studies and an author of the report said:

“The Chancellor needs to decide what period the next Spending Review should cover and what funding to make available to it. This could be the most important announcement in next month’s Spring Statement.

"The Government has already committed to increase day-to-day NHS spending by £20 billion over the next five years. Even though the latest plans have overall day-to-day spending increasing over that time, these increases wouldn’t be enough even to cover the NHS commitment in full. This suggests yet more years of austerity for many public services – albeit at a much slower pace than the last nine years. And while an economically bad Brexit would likely mean lower spending in the longer-term, if anything it might require additional spending over the next few years.”

Cllr Richard Watts, Chair of the Local Government Association’s Resources Board, said:

“Local government in England faces an overall funding gap of £8 billion by 2025. The Spending Review will therefore be make or break for vital local services and securing the financial sustainability of councils must be the top priority.

“If the Government fails to adequately fund local government in the Spending Review then there is a real risk to the future financial viability of some services and councils.

“Councils were at the front of the queue when austerity started so local services should be at the front of the queue if it is coming to an end.

“Fully funding councils is the only way to ensure they can continue to provide all of the valued local services which make such a positive difference to people’s lives. It will also save money for the taxpayer and others part of the public sector, such as the NHS.”

Last year, the Prime Minister Theresa May announced an 'end to austerity' as part of a PR drive.

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