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Austerity measures could continue until 2018

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by Jan Harris
Austerity measures could continue until 2018

Prior to the Chancellor’s Autumn Statement on 5 December, the Institute for Fiscal Studies (IFS) has warned that the squeeze on public spending may have to continue to 2017/18.

Slower than expected economic recovery may mean that the Chancellor, George Osborne, will need to raise another £11 billion from further cuts or by increasing taxes.

This would be on top of a further £8 billion cut in the welfare budget which is already planned.

The economy’s poor performance means that tax receipts have fallen while welfare payments are increasing, making it difficult for the government to reduce public spending.

Carl Emmerson, deputy director of the IFS, said: “Since the budget, the outlook for the UK economy has deteriorated and government receipts have disappointed by even more than this year’s weak growth would normally suggest.

“The planned era of austerity could run for eight years – from 2010-11 to 2017-18.”

When the coalition government was elected in May 2010 the Chancellor said he would almost eliminate the UK’s budget deficit by 2015 and reduce net debt as a proportion of GDP by 2015-16.

The IFS says that Mr Osborne is unlikely to achieve the second target and it may have to be scrapped.

Meanwhile, the British Chambers of Commerce (BCC) is calling for the government to increase investment in infrastructure projects in order to boost the economy.

In its report on transport priorities the BCC claims that investing £30 bilion on infrastructure projects such as Crossrail and the Forth Bridge, would generate £86 billion for the economy.

Adam Marshall, the BCC’s director of policy, said: “We need bold action from the government to improve the UK’s transport infrastructure.

“This kind of investment is insulated from global uncertainty, and it creates short-term confidence, jobs in the medium term, and improves the UK’s competitiveness in the long term.”

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News posted: November 26, 2012

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