Brown 'to squeeze budget by 2.9%'
Treasury documents leaked
September 18, 2009
By Gonzalo Vina London
UK Prime Minister Gordon Brown's government may have to cut spending at the sharpest pace since Britain negotiated its finances with the International Monetary Fund (IMF) in 1976, according to the Institute for Fiscal Studies (IFS).
The non-partisan research group estimated the government would squeeze its budget by 2.9 percent a year from 2011, more than the 2.3 percent it expected in April. It based its analysis on Treasury documents obtained by the Conservative opposition.
"What we have learned from the leaks are the government's plans to cut spending by 2.9 percent a year, which is the tightest since the IMF imposed spending plans in the late 1970s," said Gemma Tetlow, a research economist at the IFS, whose clients include the Bank of England and the Treasury.
The forecast undermines Brown's suggestion that the government can safeguard funds for education, police and other public services while the Treasury works to put a lid on the budget deficit.
Britain's shortfall next year will exceed 12 percent of gross domestic product, the most in the Group of 20.
Conservative leader David Cameron, who passed out the documents to journalists in London on Wednesday, said that they showed Brown had misled Parliament about the scale of the fiscal tightening that must follow the next election, which is due by June.
The documents suggest Britain will pay £63 billion (R766bn) on debt interest in 2014, more than it spends on education. The IFS estimated that to avoid spending cuts the Treasury would have to raise taxes by £29bn, amounting to 2.1 percent of national income or £930 per family per year.
"The risks of having such a huge deficit are a drag anchor on the recovery," Cameron said at a press conference yesterday.
Brown "was saying one thing in Parliament. Documents say he was doing something different. He has to explain himself." - Bloomberg
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