Public sector braced for more cuts as UK economic situation “deteriorates”

By DAVID GUNN
Published on 12/11/2012 12:26

A further £48 billion will have to found if the UK government’s deficit reduction plans are to get back on track, a new report has warned.

Some Government departments face cuts between now and 2018 on a scale similar to those in the spending review of October

2010, according to the Social Market Foundation (SMF) and the Royal Society of Arts (RSA).

The SMF and RSA said the “small print” of the March budget implied that £26 billion of new cuts would be required beyond the 2010 spending review.

But the report estimates that, due to the deteriorating economic situation, a further £22 billion of cuts will need to be found by 2018.

Ian Mulheirn, director of the SMF and author of the economic analysis, said: “According to the OBR’s (Office for Budget Responsibility) own models, the economy appears to have less room to bounce back than previously thought.

“Combined with high public borrowing since March this implies a much bigger black hole in the public finances, making the stakes for the next spending review higher than ever.”

The report comes after the Treasury announced on Friday that it is to receive a £35 billion boost as part of a deal with the Bank of England that will effectively reduce public debt.

The 2010 spending review was supposed to finish the job of deficit reduction by 2014, but the next one in December looks set to lay out “much more pain”, the report said.

The Government will need to find additional savings of 23% from departmental spending, compared with an average of 19% following the 2010 review.