The IFS Green
Budget 2017
produced in association with
ICAEW and funded by the
Nuffield Foundation with
analysis from Oxford
Economics, is published
today.
The Chancellor, Philip Hammond, remains
committed to his predecessor’s plans for
cutting day-to-day public service spending,
which is due to fall by 4% in real terms over
the next three years, having fallen very little
over the last three years. A particularly sharp
cut is planned for 2019–20, immediately prior
to the next general election. While spending
cuts are playing a greater role than tax rises in
reducing the deficit, tax is set to rise as a
share of national income to its highest level
since 1986–87.
The Chancellor has not set himself any fiscal
targets that can be missed during the current
parliament. But meeting his target of
eliminating the deficit during the next
parliament will probably mean an additional
consolidation of up to £34 billion, extending
the period of spending cuts and tax rises well
in to the 2020s.
After nearly seven years of tax rises
and spending cuts:
• The deficit this year will be higher than in all
but 13 of the 60 years before 2008, and
remains the fourth highest of 28 advanced
economies;
• The national debt is at its highest level as a
fraction of national income since 1965–66 and
is higher than that faced by all but five other
advanced economies;
• Real spending on public services has fallen
by 10% since 2009–10 – by far the longest
and biggest fall in public service spending on
record.
Looking forward, cuts are due to continue
and the shape of the state is set to
continue changing while taxes carry on
rising:
• By 2019–20, real departmental spending is
due to be 13% lower than it was in 2010–11,
with cuts of around 40% to the justice,
business, culture and environment budgets;
• By 2020–21, public spending on each of
health, pensions and overseas aid will be
higher as a share of national income than pre-
crisis, while spending on schools, defence
and, especially, public order and safety, will be
lower;
• By 2020–21, plans imply 21p of capital
spending by central government for every £1
of day-to-day spending on public services: an
historically high level and well above the
recent low point of 13p reached in 2012–13;
• £17 billion of tax rises are planned over this
parliament relative to 2015–16. Tax (and non-
tax) receipts are expected to rise above 37%
of national income for the first time since
1986–87.
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