Public spending cuts will be worse than predicted - Institute for Fiscal Studies
24 April, 2009 | By Sally Gainsbury HSJ
Public spending will be cut by 2.3 per cent a year in real terms from 2011-12 onwards, analysts at the Institute for Fiscal Studies have said.
The IFS’s prediction is far worse than the 0.7 per cent real terms growth described in the chancellor’s Budget.
IFS research fellow Gemma Tetlow said that once interest payments on the government’s growing debt and relatively fixed social security payments are factored into the 0.7 per cent growth figure, government departments such as health, education and the police would be left with an average cut of 2.3 per cent a year.
Ms Tetlow said the effect on the public sector would “feel like the end of the last Conservative government” while the actual figures would be the tightest since the end of the 1970s.
Meanwhile, Conservative shadow health secretary Andrew Lansley accused the Treasury of “burying” a clawback of the NHS’s £1.7bn surplus in the Budget.
The Conservatives base their claim on the removal of £1.5bn from the Department of Health’s expenditure limit for 2008-09 in the Budget book. As those funds have not been added to the DH’s allocations for subsequent years, Mr Lansley claimed they have been clawed back, rather than carried forward as might be expected.
However, the Treasury and DH have told HSJ this is not the case. Arcane financial reporting practices mean the Budget only reports actual spending for a year and the surplus has been safely banked in the government’s overall reserves, ready to be called on by the DH when it needs it.