There has been plenty of positive news about the UK economy in the news of late, so obviously some negatives news had to be published to ruin the excitement. The Institute for Fiscal Studies and the Institute for Government are the two biggest and most influential think tanks in Britain. Both have today announced that austerity measures in the UK could still be in place when the 2020 elections take place.
The reality check came in a meeting a head of the Spending Review that is taking place on the 26th of June. The review will be held by the Chancellor George Osborne and he will be covering spending after the next election. Mr Osborne originally predicted in 2010 that he could balance the budget within four years, but that is now not expected to happen until 2017-18.
The coalition has been able to stick to its plans that were laid out in 2010, but there has been less growth than expected. As a result of less growth the Government was not able to generate as much tax as it had planned for.
The two think tanks also declared that whoever is chancellor after the next election will probably have to raise taxes straight away. The Chancellor has already said how much government spending needs to be reduced in 2015-16. The overall cut in the parts of spending that departments can influence will have to fall by 2.8%.
The chancellor announced at the end of May that he had already reached agreement with eight government departments to make cuts of between 8% and 10% in 2015-16.
These departments have been named as:
- Ministry of Justice
- The Department for Communities and Local Government
- The Department for Energy and Climate Change
- HM Treasury
- The Cabinet Office
- The Foreign and Commonwealth Office
- The Northern Ireland Office
If you think that your business may suffer because of continual austerity measures and are not sure how it will affect your financial situation then let us have a look and do a financial forecast for you.
