Treasury must find extra 15bn, says the Item Club
CHANCELLOR Alistair Darling will have to find another £15bn of spending cuts or tax hikes if the Treasury is to meet the projections for public borrowing set out in the 2009 Budget, an Ernst & Young Item Club report will say today.
The report comes ahead of next week’s pre-budget report, in which Darling is expected to outline his proposals for bringing some credibility back to Britain’s public finances.
The forecast suggests that a further £15bn tightening will be needed between 2011 and 2013 just to meet the Treasury’s existing projections for public borrowing. Getting it well below £100bn by 2013-14 would need a fiscal tightening of £30bn or more, it says.
Peter Spencer, chief economic advisor to the Ernst & Young Item Club said: “The UK’s fiscal reputation is on notice – given the size of the deficit, action is needed. A key issue, however, in designing the post-election fiscal strategy is the impact that the sizeable policy tightening will have on the strength of the economic recovery.”