Warning of more public spending cuts

The outlook for public finances has worsened significantly in recent months, according to a briefing from the Institute for Fiscal Studies. As a result the Chancellor is likely to need to find more public spending cuts than already planned, and to consider additional tax increases.

Key points

  • Economic growth has been weaker than was forecast by the independent Office for Budget Responsibility in March 2012.
  • At the same time the growth in tax revenues has disappointed – and to a greater extent than would normally be explained purely by weak economic growth.
  • In order to meet his 'fiscal mandate' the Chancellor of the Exchequer will need to take a range of measures. Depending on exactly how bad the situation becomes, this could include: extending to 2017-18 the same average squeeze on public service spending currently planned for the Spending Review 2010 period; implementing the £8 billion of benefit spending cuts mooted in his March Budget speech; and introducing a further £11 billion of tax increases or public spending cuts.

Source: Carl Emmerson and Gemma Tetlow, Autumn Statement 2012: More Fiscal Pain to Come?, Briefing Note 136, Institute for Fiscal Studies
LinksBriefing Note | IFS press release | TUC press release | BBC report | Daily Mail report | Telegraph report