Wednesday, February 06, 2013
IFS underlines the scale of the fiscal task
Posted by David Smith at 02:30 PM
Category: Thoughts and responses

The Institute for Fiscal Studies Green Budget is always a big event, and this year's is no exception. It underlines the scale of the fiscal challenge remaining, after George Osborne has allowed the automatic stabilisers to operate in the context of a weaker-than-exepcted economy - allowing "borrowing to take the strain".

Highlights from this year's Green Budget are:

On current plans public service spending in “unprotected” Whitehall departments - that's everything except health, education and overseas aid, could fall by a third between 2010–11 and 2017–18.

If departments continue with trajectories implied by current plans public sector employment will have fallen by 1.2 million by 2017–18. This is because the public sector is responding to the squeeze by cutting jobs rather than real pay.

George Osborne will be borrowing £64 billion more in 2014–15 than he planned just two years ago. This is because he is choosing not to offset the forecast deterioration of £65 billion driven by a worse economic outlook.

Social security spending is rising from 28.5% to 32.5% of all public spending between 2010-11 and 2017-18 - cuts to working-age benefits are offset by more generous payments to pensioners.

Taking all the tax and benefit changes introduced between the start of 2010 and 2015–16 the richest households will be hit hardest.

The big increase in the personal tax allowance, at a cost of £9 billion, is "remarkable" given the fiscal climate - but doesn't really take many out of tax because of National Insurance. There is a lack of a coherent tax policy. The IFS press release is here.