By Vivienne Russell | 29 October 2012
Austerity measures will need to be handled skilfully and sensitively as public tolerance of cuts begins to wane, CIPFA warned today.
In a report published ahead of the chancellor’s Autumn Statement on December 5, the institute notes that the government’s strategy of balancing austerity with growth has been only partially successful. While spending cuts are kicking in according to the government’s plan, growth has so far proved ‘disappointingly elusive’.CIPFA’s report, The long downturn, says that in future greater emphasis will need to be placed on efforts to stimulate growth, such as public spending on capital infrastructure projects and tax incentives for private sector investment. Whichever strategies are deployed, they are likely to require even more spending restrictions in other areas and a further squeeze on the public purse.
Managing austerity effectively will require high levels of skill and care from public servants, particularly as cuts hit the most sensitive services, CIPFA said. It added that perceptions of fairness, reflecting where and which groups the cuts hit, would be a ‘critical barometer’.
CIPFA chief executive Steve Freer said: ‘The story on austerity is “so far, so good” but there is no room for complacency. [Chancellor George Osborne] will want to continue reining back public spending as aggressively as possible, while crucially staying on the right side of the public's tolerance of cuts.
‘On growth, the story is much less positive. He is likely to be searching for more levers to stimulate the economy, but will also be mindful that these initiatives have to be paid for, potentially by further tightening of spending plans.’
Freer added that the ‘critical bottom line’ of whether the government’s economic strategy was successful would be whether it achieves the deficit and debt reductions required.
Read Steve Freer’s discussion of the chancellor’s Autumn Statement challenge here.
