The Institute for Fiscal Studies yesterday published their 2013 ‘Green Budget‘, detailing their assessment and predictions of both the public finances and the wider economy. The document makes for depressing reading for the Chancellor, George Osborne. In particular, they noted:
* Borrowing up, not down. Government borrowing this year has a better than 50/50 chance of being higher than last year. Their prediction is for annual borrowing to rise to £125 billion, up from £124 billion last year.
* Taxpayers’ austerity. While 79% of planned tax rises have already been implemented, just 30% of planned cuts to spending have. Meanwhile, private sector earnings have flatlined while earnings in the public sector continued to rise as if we weren’t in an economic crisis.
* Grim prospects for taxpayers. Tax rises in the year following elections have averaged £7.5 billion over the last 30 years. Political pressures may prompt the next Government to delay spending cuts again, with yet more tax rises to plug the shortfall.
However, as well as pouring cold water on the idea of taxing pension contributions more heavily, implementing a wealth tax or raising stamp duty, they have also drawn up some suggestions for cutting spending on social security.
* Freeze all benefits for three years from April 2013. The IFS estimate this will save £7.9 billion a year by 2015-16. Even exempting the State Pension and Pension Credit from this would still save £3.4 billion a year.
* Means-test Winter Fuel Payments and free TV licences by adding them to the Pension Credit. Estimated saving between £1.5 and £2.0 billion a year by 2015-16.
* Integrate Child Benefit within Universal Credit and end additional entitlements after the second child. Estimated saving: £7.6 billion a year by 2015-16.
* Abolish remaining contributory benefits, paving the way for National Insurance to be abolished. Estimated savings: £500 million a year by 2015-16.
There’s plenty here for the Chancellor to think about as he prepares for the Budget in March. Against a backdrop of a spluttering economy that is in urgent need of a tax cutting shock, it’s time for Mr Osborne to start thinking seriously about cutting spending sooner rather than later.