Austerity will continue into 2020s, says IFS

Austerity will continue well into the next decade, according to a study by respected think-tank the Institute for Fiscal Studies (IFS).

In a new report produced by Oxford Economics, the IFS predicts the tax burden will reach its highest level in more than 30 years over the course of this parliament, with tax receipts hitting 37 per cent of national income for the first time since 1987.

Seven years after austerity began, UK borrowing remains the fourth highest of 28 advanced economies while the national debt is the highest it has been since 1966.

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Spending on public services since 2010 has already fallen by ten per cent in real terms, "the longest and biggest fall on record", says the IFS.

But "far from easing up, austerity is about to hit harder over the final three years of the parliament, putting the squeeze back on the economy, and there is little sight of the consolidation ending soon", warns The Times.

Despite the continued cuts, slower economic growth following the vote for Brexit will leave the government needing to find £34bn to eliminate the budget deficit, "one of the largest black holes in public spending in the developed world", says The Guardian.

The report also describes Theresa May's Brexit plan to take Britain out of the single market and seek a bespoke trade deal as the "second worst" option for the country.

Only leaving the EU with no deal and falling back on World Trade Organization rules would be worse, it says, adding that staying in the single market would be much better.

The bleak outlook comes at a time of severe pressure on public services, particularly social care and health, and after spending grew at its slowest rate since the mid-1950s between 2010 and 2015.

The IFS says Britain's ageing population and increasing demands on the NHS will blow a large hole in the government budget over the next two parliaments.

Consequently, despite scraping George Osborne's goal of balancing the budget by 2019/20, Chancellor Philip Hammond will have to extend austerity "well into the 2020s" to meet his target of eliminating the deficit during the next parliament, says the Daily Telegraph.

Paul Johnson, director of the IFS, said: "For all the focus on Brexit, the public finances in the next few years look set to be defined by the spending cuts announced by George Osborne."