The cuts to day-to-day spending, a little bit of revenue from increasing tax compliance, and an assumed boost to growth as a result of – also previously announced – planning reforms were just about enough to undo the fiscal consequences of economic and fiscal forecasts that had deteriorated since the Autumn says the Institute for Fiscal Studies
There is a good chance that economic and fiscal forecasts will deteriorate significantly between now and an autumn Budget,’ Paul Johnson, the director of the Institute for Fiscal Studies, said this morning. ‘If so, she will need to come back for more, which is likely to mean raising taxes even further’. adding
“That risks months of speculation over what those tax rises might be – a raid on pensions, a wealth tax on the richest, another hike to capital gains tax?’
Their report argues that the last-minute cuts – the freeze in the health element of UC until 2029 – were effectively chasing the numbers. It says that the degree of precision is ‘absurd’
‘The Treasury has clearly worked overtime to ensure that precisely the same fiscal headroom remains today as was projected in October. This was not sensible’ says the Think Tank
Coming back a week later with just a slightly bigger cut because that’s what’s needed to return the fiscal headroom to precisely where it was a few months ago risks undermining that case and discrediting attempts at genuine reform to the benefit system
‘If it was right last week to announce a halving of the health component of universal credit, it is hard to see why this week it is right to do more than that by halving it and then freezing it in cash terms’ said Paul Johnson
