Chancellor Kwasi Kwarteng will have to find spending cuts of more than £60billion if he is to meet his target to get the public finances back under control, a leading economic think tank has warned. The Institute for Fiscal Studies (IFS) said it was not possible to deliver cuts on that scale through efficiency savings and “trimming the fat” and that it would require major cuts to public services.
At the same time analysts said failure to come up with a credible plan that convinces the markets the Government is committed to reducing its debt mountain could result in a worse crisis than 1976, when the Labour government was forced to seek a bailout from the International Monetary Fund (IMF).
They warned that rising interest rates as the Bank of England seeks to curb spiralling inflation were likely to result in a “bruising” increase in unemployment. Mr Kwarteng is due to set out his medium-term fiscal plan explaining how the Government will get debt falling as a proportion of national income in the wake of his £43bn mini-budget tax giveaway on October 31.
