Philip Hammond will need to find an extra £31bn to end austerity, warns thinktank
2 min read
The Government will need to spend an extra £31bn by 2022-2023 if Theresa May is to live up to her pledge of ending austerity, a major thinktank has warned.
The Prime Minister told the Tory conference earlier this month that eight years of deep public spending cuts were now "over".
However the Resolution Foundation says that Chancellor Philip Hammond faced a “daunting task” at next week’s Budget in trying to deliver the vow while keeping the long-standing Conservative commitment to eliminate the deficit by the mid-2020s.
The thinktank says that meeting the pledge would require ministers to halt any further cuts to areas schools and police from 2019-20 onwards.
That could come at a cost of £26.3bn by 2022-23 when combined with maintaining commitments to increase spending on the NHS, defence and international aid.
Ministers would then need to cancel the final year of the benefit freeze, lifting them by 2.4% next April, at a cost of around £1.5bn in 2019-20, before rising to £1.7bn in 2022-23, the group says.
The Government would also need to reverse the cuts to work allowances in Universal Credit, at a cost of around £3bn by 2022-23, their report warns.
Elsewhere the group says tax rises will be needed in the longer term to both “end austerity” and ensure that “debt as a share of the economy will continue to fall”.
They add that cancelling the planned corporation tax cut from 19% to 17% in 2020 would save £6bn while freezing the main income tax thresholds after the manifesto targets of £12,500 and £50,000 by 2020 are hit, would save £2bn
The body also says the £13bn windfall from the Office for Fiscal Responsibility (OBR) as a result of lower borrowing could make his "mission impossible" into "just about plausible".
Deputy Director at the Resolution Foundation, Matt Whittaker, said: “The Chancellor has a seemingly impossible task in his Budget of ending austerity, reducing the national debt and keeping the public finances protected against any Brexit uncertainty.
“But should strong recent public finances figures lead the OBR to deliver a £13bn windfall, the Chancellor’s ‘mission impossible’ may become ‘just about plausible’.
“However, ‘ending austerity’ in relation to schools, hospitals and social security carries a huge price tag of over £30bn by the end of the parliament. Ending austerity, while also keeping debt falling as a share of the economy, will therefore require tax rises.
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