Chancellor needs to find £33bn to avoid austerity and maintain deficit - IFS

UK chancellor Philip Hammond would have to find an extra £33bn in public funds in order to keep the national deficit at its current level of 2.4% and avoid austerity, the Institute for Fiscal Studies has said.

With ministers sweating over their departmental budgets ahead of Hammond’s autumn budget statement, the thinktank estimated only a major boost in government spending would lead to no need for further tax rises or benefit cuts.

IFS deputy director Carl Emmerson said: “It would imply a £17bn boost to planned spending on public services alongside a £5bn net tax cut and an £11bn increase in planned benefit spending – i.e. a giveaway of £33bn a year.

Uncertainty caused by ongoing Brexit negotiations and government instability has led many commentators to forecast a major slowdown in the strength of the economy in the coming years.

The IFS concluded that the government has a difficult decision to make in terms of its budget this year, of whether to maintain the deficit at its current level and ensuing debt levels, or implementing a looser fiscal policy towards the deficit.

“As ever the chancellor has choices and as ever there are trade-offs,” Emmerson added.

“He could decide to spend and borrow more; he could decide to spend and tax more; or he could decide to stick with his current plans and see spending continue to fall. He is not going to be able to give everyone everything they want and the sooner he makes plain what his choices are the better for all.”