By Vivienne Russell | 25 November 2014
A Conservative government is unlikely to meet Prime Minister David Cameron’s pledge to deliver a surplus by 2018/19, the Social Market Foundation warned in its pre-Autumn Statement briefing.
The think-tank said that, with the deficit remaining ‘stubbornly’ high, even the deep public spending cuts planned for the next Parliament would not be sufficient to get the public finances into surplus by that date.
Updating Office for Budget Responsibility forecasts, the SMF predicted that borrowing in 2018/19 would be £15bn higher that current estimates.
In his speech to the Conservative Party conference in October, Cameron said that the party would ‘balance the books by 2018’.
However, SMF chief economist Nida Broughton said the only way to hit the target would be to rely on surprise over-heating of the economy that temporarily reduces borrowing, or to pencil in further cuts on top of the £38bn already planned.
‘Based on our estimates of borrowing, this would take the total cuts required to £52bn after 2015/16m; she added.
Considering other parties’ fiscal plans, the SMF said Labour could meet its target of running a current budget surplus by sticking to the current government’s spending plans, but with a much smaller margin for error. Labour would also be able to take £10bn out of the current government’s cuts programme and still meet its target.
The Liberal Democrats, however, would need to find an extra £5bn in cuts to meet their target of eliminating the structural current deficit by 2017/18.
Broughton concluded the state of the UK economy was pivotal to the success of repairing the public finances. If the sustainable growth of the early 2000s was repeated, there were be no need for fiscal consolidation in the next parliament at all.
‘But if we see a repeat of the last few years, it will become all but impossible to meet any of the parties’ current targets for public spending.
‘The additional cuts that would be required to meet the targets on time look inconceivable in a historical context.’
