News / Economy

UK facing gloomy outlook for public finances: IFS

Thursday, 17 March 2016 6:19 PM [ Last Update: Thursday, 17 March 2016 6:40 PM ]

UK Chancellor of the Exchequer George Osborne holds up his budget case for the cameras as he stands outside number 11 Downing Street, before delivering his budget to the House of Commons, in London, Britain, March 16, 2016. ©Reuters

A leading economic think tank has warned that Britain is facing extended austerity measures for another year with lower living standards and falling wages under the recently proposed budget.

The Institute for Fiscal Studies (IFS) issued the warning in its analysis released on Thursday one day after UK Chancellor of the Exchequer George Osborne delivered Budget 2016 to the House of Commons.

“Yet another year of austerity penciled in,” IFS Director Paul Johnson said, adding, “The underlying deterioration in the public finances can’t be smoothed away.”

Johnson also cautioned that the budget will benefit the richest in the society, saying, “The biggest gainers were those towards the top of the income distribution, with most towards the bottom broadly unaffected.”

He further accused Osborne of being “disingenuous” about his tax cuts for the lowest paid, noting that lower productivity growth could make the UK poorer in the future.

Osborne was “running out of wriggle room” trying to get his budget forecast into surplus by 2019-20, the IFS director added.

The IFS chart shows the impact of tax and benefit reforms in the UK between May 2015 and April 2019 (including universal credit).

Meanwhile, another think tank, the Resolution Foundation, warned that the richest British households would be the greatest beneficiaries from tax changes.

Under the new tax reforms, the poorest 20 percent of households would gain just £10 a year on average, compared to the richest 20 percent getting £225, according to the foundation.

Britain’s former coalition government, led by the Conservatives, launched austerity measures, including welfare cuts, when it came to power in 2010 in a bid to tackle the country’s mounting debt and sluggish growth following the 2009 financial crisis in Europe.

Led by Prime Minister David Cameron, the current UK Tory government, which was elected last May, has also continued its austerity agenda despite public protests against its controversial cuts in recent years.

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