Economists question deficit reduction plan
By politics.co.uk staff
Two leading economic thinktanks have raised question marks around the government’s commitment to cutting the deficit.
Gordon Brown and Alistair Darling plan on halving the deficit in four years, but the National Institute of Economic and Social Research ((NIESR) raised severe doubts about the plan today.
“Plans for fiscal consolidation will not be sufficient to start bringing down net public debt as a share of GDP by the middle of this decade, as the Treasury expects. Instead it will carry on rising,” the report said.
“Additional retrenchment will be needed through either extra spending cuts or fixed tax increases or a mixture of both.”
Meanwhile, the Institute of Fiscal Studies (IFS) said today the government should aim for a total tightening of around five per cent of national income, or £70 billion, over the five years to 2015-16.
It said this would mean the next government would need to find another £13 billion of tax increases or spending cuts by 2015/16 on top of those necessary to achieve the plans in the chancellor’s November Pre-Budget report (PBR).
