Austerity to continue unless Hammond spends, says IFS

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Chancellor Philip Hammond is due to unveil his Spring Statement next month

Philip Hammond must spend billions extra to end austerity, says think tank the Institute for Fiscal Studies (IFS).

To maintain per capita spending across government departments that do not have ring-fenced budgets, he must find an extra £5bn a year by 2023, it adds.

And maintaining spending on unprotected services as a share of national income would require £11bn on top of spending plans set out in the 2018 Budget.

The Treasury says long-term funding decisions will be made later this year.

Population growth

In its analysis, the IFS said spending increases already promised by the chancellor would be swallowed up by commitments to fund the NHS, defence and international aid.

That could mean cuts in other areas, IFS director Paul Johnson told the BBC’s Today programme.

“[Unless he finds the money] we will continue to see cuts in some departments at least as a fraction of national income, and don’t forget the scale of the cuts up to now really has been extraordinary historically.

“We’ve had £40bn of cuts to department spending and cuts of 30% and 40% to some budget items. So even if he even if he stops cutting, it’s still not going to feel great in a lot of areas.”

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The Treasury says health is the “number one spending priority”

But a Treasury spokesman said public investment would hit peaks not seen since 1979.

“The chancellor has said that the Spending Review will take place in 2019, and that is the right moment for government to make long term funding decisions,” he said.

“We have made clear that health is our number one spending priority by announcing a five-year settlement which will provide an extra £34bn a year for the NHS by 2023-24.

“Outside the NHS, total day-to-day departmental spending is now set to grow in line with inflation, and public investment will reach levels not sustained in 40 years in this parliament. “

Stimulus package?

Meanwhile, the IFS said a no-deal Brexit would mean lower growth, requiring either spending cuts or higher taxes.

And it said in the short term the government might need to borrow more to fund a stimulus package to mitigate the impacts for the hardest-hit areas of the economy.

But Mr Johnson said any spending boost to spending would be temporary.

“Obviously if there is some kind of no-deal Brexit that is going to be bad for the economy both in the short run and in the long run, there will be less money around.

“[The chancellor] can probably put a bit more money in [in the short run], but in the long run that is going to mean several more years of austerity to row back from that initial expansion.”

‘Brutal’

Shadow chancellor John McDonnell said: “The evidence is mounting that despite Theresa May’s rhetoric, austerity is not over.

“Unless Philip Hammond, at the very least, finds another £5bn at the Spring Statement, departments will be planning for yet more cuts next year.

“Nine years of brutal Tory austerity have wounded our public services and the whole country which relies on them.”

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