12 Oct 2022
Think tank the Institute for Fiscal Studies (IFS) has warned Chancellor Kwasi Kwarteng that he will need to make 'big and painful' spending cuts in order to help stabilise the UK economy.
The IFS predicts that tax cuts combined with a weak economy will create a 'large shortfall in revenue'. It said that recent government policy decisions such as the Energy Price Guarantee will add to borrowing. The IFS forecasts that borrowing will be £194 billion for 2022, which is £94 billion higher than it previously forecast in March.
A 'credible strategy and plan for fiscal sustainability' is needed from the government, the IFS said. It warned the Office for Budget Responsibility (OBR) that it should be wary of a promise to cut spending in upcoming years 'without sufficient detail of where the axe would fall'.
Paul Johnson, Director of the IFS, said: 'The Chancellor says he wants to get the public finances on a sustainable basis. It looks to us like that's going to mean tens of billions of pounds of spending cuts in order to achieve that.
'One of the problems the government faces is we have had a decade and more of really tight spending settlements – we're still spending less on a lot of public services than we were just over a decade ago.'