The UK is only about 40% of the way through the “colossal” public spending cuts that ministers have planned, a leading think tank warned yesterday.
The Institute for Fiscal Studies (IFS) said that despite a £35billion squeeze during the last four years of austerity, a further £55billion of savings have yet to come.
Chancellor George Osborne was planning “a fundamental reimagining of the role of the state” that would change it “beyond recognition”, the IFS claimed.
In its analysis of the Office for Budget Responsibility’s figures, the IFS found that if spending cuts carried on at the same pace after May’s election that they have over the past four years, welfare cuts or tax rises of £21billion a year would be needed by 2019/20.
The savings would be required at a time when the Conservatives have committed to reducing income tax at a cost of £7billion.
IFS director Paul Johnson said that the precise nature of cuts to services such as local government, defence and transport had not yet been spelt out, and he stressed that it would be wrong to describe them as “unachievable”.
However, he said voters would be justified in asking whether the chancellor was planning “a fundamental reimagining of the role of the state”.
He added: “One thing is for sure. If we move in anything like this direction, whilst continuing to protect health and pensions, the role and shape of the state will have changed beyond recognition.”
But Mr Osborne attacked “unfair” media coverage of his plans yesterday.
“Government departments are going to have to make savings. On the welfare bill we are going to have to do things like freeze working-age benefits,” he said.
“I’m not pretending these are easy decisions or that they have no impact.
“But the alternative of a return to economic chaos, of not getting on top of your debts, of people looking at Britain across the world and thinking that is not a country in charge of its own destiny, is not a world that I want to deliver.”
Meanwhile, the chancellor’s announcement in the Autumn Statement that search and rescue and air ambulance charities would be eligible for VAT refunds from April have been welcomed.
Sir Robert Smith, Liberal Democrat MP for West Aberdeenshire and Kincardine, said: “Search and rescue teams operating in the north-east, particularly in the Cairngorms, provide a vital service.
“This will give teams, like Braemar Mountain Rescue, a financial boost to help them invest in emergency equipment so they can continue to their life-saving work.”