Newspaper article The Journal (Newcastle, England)

It's Tough - and There's Still a Long Way to Go

Newspaper article The Journal (Newcastle, England)

It's Tough - and There's Still a Long Way to Go

Article excerpt

Byline: ECONOMY ANDREW WOODCOCK business@ncjmedia.co.uk

THE austerity programme set out by Chancellor George Osborne for the five years after the general election is tougher than in any other advanced economy, with "a long way to go" before Britain's public finances recover from the fi-nancial crisis of 2008, a report by a respected economic think tank has found.

Under the plans set out by Mr Osborne in December's Autumn statement, Whitehall departments face real-terms cuts of 14.1% (PS51.4bn) - after taking inflation into account - in the next parliament, on top of 9.5% (PS38.2bn) over the past five years, while the Chancellor's aim of slicing PS12bn from the welfare budget "will not be easy", said the Institute for Fiscal Studies (IFS) in its annual Green Budget.

If health, schools and overseas aid are protected in the same way they have been under the coalition, unprotected departments will face cuts totalling 42% over the decade.

The fiscal targets set by the three main parties allow each of them leeway for a less painful consolidation than envisaged in the Autumn Statement, said the IFS, with Conservatives able to hit theirs by cutting 6.7% (PS24.9bn) from departmental spending, Liberal Democrats 2.1% (PS7.9bn) and Labour 1.4% (PS5.2bn) - but at the cost of more debt.

Although none of the major parties is talking about significant tax rises after the May 7 poll, the IFS warned that the first year after each of the last five elections has seen hikes totalling PS5bn at today's prices, whichever party has won - the equivalent of hiking the main rates of income tax by one percentage point, increasing all employee and self-employed National Insurance rates by one percentage point or raising the main rate of VAT by one percentage point.

However, there was better news from Oxford Economic, which collaborated with the IFS on the Green Budget and forecast that the slump in oil prices will propel UK growth to a healthy 3% in 2015 - largely driven by consumer spending and business investment - with the economy continuing to grow at "a solid pace" over the longer term. …

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