Chancellor George Osborne’s plans to boost the economy are unlikely to have any impact on growth, according to the Institute for Fiscal Studies (IFS).
The scale of public spending cuts over the next seven years was described as “unprecedented” since the end of World War II, the IFS said in its assessment of the chancellor’s Autumn Statement. Osborne announced plans to give small businesses better access to finance, a deal with pension funds to pump £20bn into public infrastructure projects and a number of projects around the country to improve road and rail links.
However, Helen Miller, who is a senior research economist at the IFS, said: “I do not think any of this looks set to be the key to unlocking our long-run growth potential. All these plans are quite small.”
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Miller said the additional money put towards infrastructure improvement should be viewed in the context of more than £20bn worth of cuts to infrastructure spending between last year and 2015. Credit easing plans and pension fund infrastructure investment programmes lack essential detail, she said.
On the same day the chancellor issued his Autumn Statement, the Office for Budget Responsibility outlined its own figures, downgrading the growth forecasts for the UK. It predicted growth of 0.9 per cent for this year, down from the 1.7 per cent it forecast in March, while the outlook for next year’s growth has been cut from 2.5 per cent to 0.7 per cent. The Bank of England said growth of more than one per cent was not expected this year or in 2012.
Paul Johnson, director of the IFS, said: “One begins to run out of superlatives for describing quite how unprecedented this is. Certainly there has been nothing like it in the last 60 years.”
He added that the chancellor must be “keeping his fingers crossed that something turns up” which will allow him to make a further £23bn of “entirely unspecified” cuts, as announced in the statement. Johnson said it is becoming increasingly difficult to make cuts because there should no longer be “any waste left”.
Shadow chancellor Ed Balls has criticised the government’s approach to the economy, claiming it undermines growth and results in the country borrowing more money.