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| Next government 'will have to cut 50% faster to meet deficit target' | Next government 'will have to cut 50% faster to meet deficit target' |
| (4 months later) | |
| The next government will have to increase the pace of spending cuts by 50% in the two years after the 2015 election if it is to meet the current deficit target, new research by the Resolution Foundation thinktank shows. | The next government will have to increase the pace of spending cuts by 50% in the two years after the 2015 election if it is to meet the current deficit target, new research by the Resolution Foundation thinktank shows. |
| The report finds that if the next government decides instead to stick with the current – already punishing – pace of cuts, the deficit target will only be met by raising taxes by £10bn or finding further welfare cuts. | The report finds that if the next government decides instead to stick with the current – already punishing – pace of cuts, the deficit target will only be met by raising taxes by £10bn or finding further welfare cuts. |
| The stark message shows the scale of the spending challenge facing all parties after the election, and the pressure they will face to come clean with the electorate about their plans. | The stark message shows the scale of the spending challenge facing all parties after the election, and the pressure they will face to come clean with the electorate about their plans. |
| On the assumption that taxes are not increased, welfare spending is maintained at current levels and key departments such as health and aid remain protected from cuts, some departments will face crippling demands to cut spending. | On the assumption that taxes are not increased, welfare spending is maintained at current levels and key departments such as health and aid remain protected from cuts, some departments will face crippling demands to cut spending. |
| The Resolution Foundation calculates that by 2017-18, the final planned year of cuts, the Foreign Office will have had its budget cut by 64% from the baseline of 2010-11, the first year of coalition cuts. | The Resolution Foundation calculates that by 2017-18, the final planned year of cuts, the Foreign Office will have had its budget cut by 64% from the baseline of 2010-11, the first year of coalition cuts. |
| The Home Office budget will be slashed by 46% over the same period and the Ministry of Defence by 36% – a total reshaping of the modern state. Overall, budgets would be 18% smaller on average. | The Home Office budget will be slashed by 46% over the same period and the Ministry of Defence by 36% – a total reshaping of the modern state. Overall, budgets would be 18% smaller on average. |
| The thinktank says the government will have to cut departmental spending by a further £26bn between 2016 and 2018. This is equivalent to 3.8% a year – a pace of cuts around 50% faster than that either in the current 2010-15 spending review period (2.4%) or that being planned for 2015-16 (2.7%). | The thinktank says the government will have to cut departmental spending by a further £26bn between 2016 and 2018. This is equivalent to 3.8% a year – a pace of cuts around 50% faster than that either in the current 2010-15 spending review period (2.4%) or that being planned for 2015-16 (2.7%). |
| The Resolution Foundation describes cuts on this scale as implausible. | The Resolution Foundation describes cuts on this scale as implausible. |
| These cuts will also imply a vast shift in the profile of spending within Whitehall. The Department of Health, for instance, would see its share of total spending rise from one quarter in 2010-11 to one third in 2017-18, underlining the degree to which an ageing population is changing what the government spends its resources on. | These cuts will also imply a vast shift in the profile of spending within Whitehall. The Department of Health, for instance, would see its share of total spending rise from one quarter in 2010-11 to one third in 2017-18, underlining the degree to which an ageing population is changing what the government spends its resources on. |
| Under current policy, welfare spending per working-age household will fall by 15% between 2010-11 and 2017-18. At the same time, spending on pensioners' households will rise by 6%. | Under current policy, welfare spending per working-age household will fall by 15% between 2010-11 and 2017-18. At the same time, spending on pensioners' households will rise by 6%. |
| The research also shows the impact of the cuts that have already been announced in the 2010 spending review. It calculates that government departmental budgets will be around 10% smaller on average by 2014-15 than in 2010-11. | The research also shows the impact of the cuts that have already been announced in the 2010 spending review. It calculates that government departmental budgets will be around 10% smaller on average by 2014-15 than in 2010-11. |
| But some departmental protections mean some departments will have come off far worse than others. Home Office spending by 2014-15 will have fallen by a quarter, the budget of Eric Pickles's communities department will have fallen by 55% and the Foreign Office by a half. | But some departmental protections mean some departments will have come off far worse than others. Home Office spending by 2014-15 will have fallen by a quarter, the budget of Eric Pickles's communities department will have fallen by 55% and the Foreign Office by a half. |
| Overall, the research shows the extraordinarily tough choices facing the next government regardless of their politics. | Overall, the research shows the extraordinarily tough choices facing the next government regardless of their politics. |
| The chief executive of the Resolution Foundation, Gavin Kelly, said: "Whoever wins the next election will face nightmarishly difficult choices over public finances. If the current deficit reduction path and ringfencing strategy is pursued then the implications for departmental cuts feel totally implausible, and if they were actually to happen would have profound implications for the role and shape of the 21st-century state. | The chief executive of the Resolution Foundation, Gavin Kelly, said: "Whoever wins the next election will face nightmarishly difficult choices over public finances. If the current deficit reduction path and ringfencing strategy is pursued then the implications for departmental cuts feel totally implausible, and if they were actually to happen would have profound implications for the role and shape of the 21st-century state. |
| "Something is going to have to give. This could be in the form of tax rises, more slippage in the deficit-reduction timetable and further revisions in the estimates of the size of the structural deficit, or yet more painful decisions in social security spending, something which both main parties are contemplating." | "Something is going to have to give. This could be in the form of tax rises, more slippage in the deficit-reduction timetable and further revisions in the estimates of the size of the structural deficit, or yet more painful decisions in social security spending, something which both main parties are contemplating." |
| The scale of the cuts outlined in the report is likely to lead to political pressure on the shadow chancellor, Ed Balls, to state closer to the election that he will not try to cut the deficit as fast as planned by the current government, a decision that will lead to accusations from the Conservatives that Labour simply does not have the political courage to reduce borrowing. | The scale of the cuts outlined in the report is likely to lead to political pressure on the shadow chancellor, Ed Balls, to state closer to the election that he will not try to cut the deficit as fast as planned by the current government, a decision that will lead to accusations from the Conservatives that Labour simply does not have the political courage to reduce borrowing. |
| Labour in turn could argue that the scale of the cuts cannot be achieved. Balls could then promise to cut at a slower pace. | Labour in turn could argue that the scale of the cuts cannot be achieved. Balls could then promise to cut at a slower pace. |
| So far, Labour has said it will accept as its "starting point" the £11.5bn cuts proposed by the government in 2015-16, the year being negotiated by cabinet ministers in the current spending review. | So far, Labour has said it will accept as its "starting point" the £11.5bn cuts proposed by the government in 2015-16, the year being negotiated by cabinet ministers in the current spending review. |
| The £11.5bn cut represents a 2.7% overall cut, faster than the average annual cut in the 2010 spending review. With aid, schools and health again protected, this translates to cuts in the non-protected departments by 2015-16 of around 8%. | The £11.5bn cut represents a 2.7% overall cut, faster than the average annual cut in the 2010 spending review. With aid, schools and health again protected, this translates to cuts in the non-protected departments by 2015-16 of around 8%. |
| The Treasury is already struggling to find those £11.5bn cuts, underlining how hard it would be to cut even deeper in 2016-17 and 2017-18, effectively in effect the second and third years of the next government. | The Treasury is already struggling to find those £11.5bn cuts, underlining how hard it would be to cut even deeper in 2016-17 and 2017-18, effectively in effect the second and third years of the next government. |
| George Osborne had planned to complete the deficit-reduction programme in one parliament, but has been forced to extend the process into the next parliament due to lower-than-expected growth. | George Osborne had planned to complete the deficit-reduction programme in one parliament, but has been forced to extend the process into the next parliament due to lower-than-expected growth. |
| If Labour decides it can not stomach cutting faster in 2016-2017 and 2017-18 than in this parliament, the report argues, it will have to raise £10bn in fresh taxes or cut welfare further. For illustrative purposes the Resolution Foundation suggests that this would require cutting the already hard-hit tax credit budget by another 10% in real terms, increasing the standard rate of tax from 20% to 21% and freezing the state pension in 2016-17 and 2017-18, although this would raise only around £5bn, half of the required amount. | If Labour decides it can not stomach cutting faster in 2016-2017 and 2017-18 than in this parliament, the report argues, it will have to raise £10bn in fresh taxes or cut welfare further. For illustrative purposes the Resolution Foundation suggests that this would require cutting the already hard-hit tax credit budget by another 10% in real terms, increasing the standard rate of tax from 20% to 21% and freezing the state pension in 2016-17 and 2017-18, although this would raise only around £5bn, half of the required amount. |
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