Chancellor needs to find extra billions to end austerity

James Booth
Chancellor Philip Hammond must find billion if he is to end austerity (Source: Getty)

The chancellor Philip Hammond will have to find billions of pounds to prop up public spending to deliver on promises of ending austerity.

According to a report from think tank the Institute of Fiscal Studies (IFS), over the four years from 2019-20 to 2023-24, Hammond would need to find a further £2.2bn to avoid cuts to unprotected spending.

He would need to find an extra £5bn to avoid spending falling in per-capita terms and a further £11bn to avoid spending falling as a share of national income.

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The chancellor is due to publish the Treasury’s 2019 spending review sometime this year, which will contain detailed departmental allocations for 2020-21, and possibly beyond.

Whatever decision Hammond makes it will follow almost a decade of spending cuts with departmental spending on a like-for-like basis almost £40bn lower in 2018-19 than in 2009-10, the IFS said.

With pre-existing spending commitments on health, defence and aid over half of public service spending (£156bn) has already been largely allocated.

The IFS said Brexit should not affect the forthcoming spending review, although it said a disorderly Brexit could lead to lower economic growth in the short and long term.

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It said this would eventually require lower spending or higher taxes than would have been the case.

It added that fiscal tightening would not have to take place immediately, and said there could be a case for more spending over the next few years to assist with border issues or mitigate the impact for the worst affected areas or sectors.

A Treasury spokesperson said: “The chancellor has said that the spending review will take place in 2019, and that is the right moment for government to make long term funding decisions

"We have made clear that health is our number one spending priority by announcing a five-year settlement which will provide an extra £34bn a year for the NHS by 2023-24. Outside the NHS, total day to day departmental spending is now set to grow in line with inflation, and public investment will reach levels not sustained in 40 years in this parliament."