IFS predicts UK finances will be '£25 billion worse off' by 2020
09 Nov 2016
The outlook for Britain's public finances has worsened by £25 billion since the March Budget, according to economic think tank the Institute for Fiscal Studies (IFS).
The IFS estimates that by 2019/20 a lower growth rate could see tax revenues fall by £31 billion compared to the forecast in this year's Budget, assuming financial policy remains the same.
This could be offset by £6 billion if the UK halts payments to the EU budget, but overall borrowing would be £25 billion more than forecast in the Budget.
This would be a deficit of £14.9 billion by 2020. The former Chancellor, George Osborne, had targeted a UK surplus of £10.4 billion by then.
The predictions come ahead of this month’s Autumn Statement and assume that all of the spending cuts previously announced by Mr Osborne can be delivered. However, the new Chancellor, Philip Hammond, has already indicated that he will prioritise spending on new homes and transport.
IFS research economist, Thomas Pope, said: ‘The new Chancellor's first fiscal event will not be easy. Growth forecasts are almost sure to be cut, leading to a significant increase in the deficit even if all the very challenging spending cuts currently planned are in fact delivered.’
The Bank of England recently raised its forecast for economic growth next year to 1.4% from 0.8%, but lowered growth expectations for 2018 from 1.8% to 1.5%.
The Chancellor will present the Autumn Statement on 23 November – we will be providing a full summary on our website.