27 January 2006
Most Whitehall departments will face a spending squeeze in the 2007 Comprehensive Spending Review if the chancellor sticks to the spending limits outlined in his Pre-Budget Report, independent experts have warned.
The Institute for Fiscal Studies said that if Gordon Brown keeps to the annual spending limits for 2008/09, 2009/10 and 2010/11 outlined for the first time in his PBR in December, public spending will increase by just 1.8% per year in real terms.
The economic think-tank made the projection in its Green Budget 2006, published on January 25, which analyses the chancellor's options in his forthcoming Budget.
According to the IFS, allowing for modest increases in health and education spending of 4.4% and 2.4% a year respectively would leave just 0.8% a year in real terms for all other Whitehall ministries.
As a result, areas such as policing, defence, transport and local government could all expect to see funding squeezed.
'Brown's tentative spending numbers do look hard to square with some of his public spending policies,' IFS director Robert Chote said. 'They imply a tight squeeze on politically sensitive issues.'
The IFS also said the chancellor would have to raise taxes by £2.5bn to meet his plans for the current spending round.
The think-tank's study coincided with publication of the Commons' Treasury select committee report on the PBR. It concluded that a review of the chancellor's 'golden rule' would be 'timely'.
'Its focus should be on ensuring that fiscal policy is sustainable on a forward-looking basis, rather than encouraging changes to tax levels or spending now as a consequence of data revisions relating to levels of growth several years ago,' the report said.
PFjan2006
