IFS chief raises doubts over Autumn Statement
Director of leading public-finance think tank questions credibility of the chancellor’s announcement, which was initially well received
Institute for Fiscal Studies (IFS) director Paul Johnson has warned that if budgetary plans outlined in this week’s Autumn Statement are seen through, spending cuts would need to occur on “colossal scale”. While Johnson stopped short of dubbing the plans “unachievable”, he said that voters could be forgiven for wondering whether chancellor George Osborne was aiming for a “fundamental reimagining” of the State.
“One thing is for sure,” he said, “if we move in anything like this direction, while continuing to protect health and pensions, the role and shape of the State will have changed beyond recognition.”
Speaking to the BBC, Johnson queried Osborne’s aim to reach a budget surplus by around 2018 or 2019. “The key thing that’s going to have to happen for a surplus to occur in four or five years is some really dramatic spending cuts. If you look at some of the numbers here, you’re looking at massive cuts in public services. Spending per head in 2018 will be about half of what it was in 2010, and that’s a colossal change.”
On the ultimate feasibility of the plans, Johnson added: “The chancellor has said that he wants to reduce public spending as well as welfare. To be fair, [cuts] have been easier to do over this Parliament. But it’s going to be a lot more difficult the longer you carry on.”
Osborne also said in his Statement that 98% of the country would benefit from a complete overhaul in stamp duty. However, it could be argued that this was a bid to grab headlines and obscure the reality that the Coalition has missed its own Budget targets. As Shadow chancellor Ed Balls pointed out, borrowing will exceed targets by £4.9 billion this year and £7.6bn the next – adding to a total of £219bn more borrowing than was originally planned in 2010.
The chancellor’s headline figure is also based upon the incorrect assumption that 98% of us actually want to buy a new home.
The IFS said that while £35bn of cuts had already happened, there was still £55bn to come. Overall, total government spending is declining by over 22% between 2010 and 2020.
Other notable announcements from the statement that will be of interest to business leaders include:
Introduction of new government-backed loans of £10,000 for postgraduate study for under-30s
£20m investment to improve careers advice and guidance for young people
Abolition of National Insurance contributions for apprentices under the age of 25, so more businesses can take them on
Businesses will also no longer have to pay NI for any employees under the age of 21
A pilot scheme of career-change work experience and training opportunities for older benefit claimants to help them re-skill for the workplace
An additional £3m spending on improved enforcement of the National Minimum Wage