Spring statement cuts will undermine growth forecast, NEF warns

The cuts announced in the spring statement today will undermine the growth forecast by the Office for Budget Responsibility (OBR), according to the New Economics Foundation (NEF).

Hannah Peaker, deputy chief executive at NEF, said:

“The Chancellor claims that she is focused on improving living standards for ordinary people, yet the cuts announced to social security and departmental spending will almost certainly undermine the growth that has been forecast.

“This will come back to bite the government because they have been left with wafer-thin margins on growth to meet their fiscal targets, beckoning further austerity in the future.

“The only way to free ourselves from this doom-loop of austerity is to stop designing fiscal policy to meet arbitrary rules and make decisions that better balance the benefits of public services against the costs of borrowing.”

Chaitanya Kumar, head of economic and environmental policy at NEF, said:

“The chances of maintaining the Chancellor’s headroom have been left hanging by a thread.

“According to the OBR, even a slight deterioration in the economic outlook — such as a modest dip in productivity, a small fall in tax receipts, or a minor rise in interest rates or inflation — would be enough to wipe out the entire £9.9 billion current budget surplus.

“That’s equivalent to the effect of cutting the growth forecasts by 0.1% a year, or gilt yields rising by just 0.6 points — both highly realistic possibilities. This isn’t economic resilience — but being a hostage to fortune.”

Tom Pollard, head of social policy at NEF, said:

“Today’s assessment confirms that ill and disabled people will see cuts to benefits amounting to around £6.5bn a year by 2029 – 30. Yet the Department for Work and Pensions and the OBR between them have not yet been able to forecast any impact on employment outcomes.

“The government’s narrative to justify benefit cuts for ill and disabled people has completely fallen apart – it is clearer than ever that the real driver has been pressure to meet an arbitrary savings target.

“Resorting to the failed playbook of cuts and conditionality will push people into poverty and poorer health rather than helping them into work.”

Contact

James Rush — james.rush@neweconomics.org

Notes

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