£48bn of spending cuts needed by 2018, argues report
Alarming public finance figures indicating further eye-watering cuts and prolonged austerity suggest the Government should focus on localising public finances and economic growth, a think tank has urged.
An analysis issued today by cross-party think tank the Social Market Foundation (SMF) and the Royal Society of Arts (RSA), based on models used by independent forecasters the Office for Budget Responsibility (OBR), indicate an extra £48bn of additional tax hikes or spending cuts will be required by 2018.
According to the report, Fiscal Fallout, the likelihood of a greater than anticipated black hole in the nation’s finances – the March Budget implied only £26bn of cuts would be needed beyond the current Spending Review period – suggests unprotected Whitehall departments will see their budgets shrink by nearly a quarter (23%).
In effect departments would face sharper yearly cuts of 3.7% between 2015 and 2018, compared with 2.3% under the current Spending Review – making some departments like the Home Office and Ministry of Justice 40% smaller than they were at the start of the decade.
To balance the demands of deficit-reduction and public service reform, the RSA argues for a radical re-evaluation of how public services are delivered, focusing on localising public finances, promoting preventative services and promoting ideas like localised spending on growth.
Report author and director of the SMF, Ian Mulheirn said the OBR’s modelling shows the economy has less room to bounce back. ‘Combined with high public borrowing since March this implies a much bigger black hole in the public finances, making the stakes for the next spending review higher than ever.’
'Combined with the savings pencilled in at the last Budget, the developments since March mean that the Chancellor will have to lay out some eye-waering cuts at the next spending review and will prolong austerity deep into the next parliament.
Ben Lucas, chair of public services at the RSA said: ‘Faced with the unprecedented level of cuts to public spending outlined by the SMF, we can’t continue to tinker around with a model of public services that was designed in the 1940s. What’s needed is a radical new approach based on social productivity which moves away from Whitehall towards local-based collaboration, integration and shared services.’
OBR's performance on forecasting is lamentable and is often caught 'catching' up with everybody else. Even the IMF recognises the relationship between public expenditure cuts and diminished or negative economic growth but no mention of this here. A great service would be performed if the SMF had spent some time analysing the causes of the worsening prospect for the deficit (i.e. increased pressure on spending and reduced taxes).Patrick Newman, ex local government, Stevenage, Added: Monday, 19 November 2012 09:37 AM
My worry is that local councils will get less and less money to deliver their services, and we will start to rely on central government to give money to organisations like Capita to employ the cheapest possible private sector organisation (who will make a profit) to deliver these services. These private sector orgs will employ contract staff to do the work and job security, safety, mortgages and pensions will be consigned to history(except at Capita who will be running all the services in the UKWill Bedford, former council employee, Added: Wednesday, 14 November 2012 12:01 AM
Deficit reduction by sacking staff will not work unless people are left to starve after being made unemployed. Public sector reform means cuts to terms & condition and the wholesale destruction of entire services as Austerity is extended into 2018 and beyond. My prediction, that the triple dip recession will become a full blown depression imagine the 1930s but worse.David Hambly, Added: Tuesday, 13 November 2012 12:18 PM
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