Britain is facing public spending cuts on a scale unseen for a generation whoever wins the general election, an influential think-tank warned today as it accused the main parties of failing to come clean with voters.
In a scathing report, the Institute for Fiscal Studies (IFS) said the public were being denied an “informed choice” because none of the parties had been prepared to set out their plans for tackling the record £163bn (€187bn) deficit.
IFS director Robert Chote said that Labour, as the party of government, was “primarily” to blame because it had refused to carry out a spending review ahead of the election on May 6.
However he was also critical of the Conservative plans to start spending cuts this year when the recovery remained “fragile”, even though it would make little overall difference to the long-term outlook for the public finances.
All parties, he suggested, were being “overambitious” in their claims to be able to cut spending and warned that whoever formed the next government would have to rely far more on tax increases than so far admitted.
The failure of any of the main parties to come forward with significant cuts to welfare payments meant that they would have to cut deep into public services, he added.
“Over the four years starting next year, Labour and the Liberal Democrats would need to deliver the deepest sustained cuts to spending on public services since the late 1970s,” he said.
“While, starting this year, the Conservatives would need to deliver cuts to spending on public services that have not been delivered over any five-year period since the Second World War.”
The report was met by a slew of claims and counter-claims among the parties, with Labour insisting they had a plan in place to halve the deficit, the Tories claiming taxes would have to rise faster under Labour and the Lib Dems, and the Lib Dems arguing that the Tories could not afford their promised national insurance (NI) cut.
Launching the IFS analysis, Mr Chote said none of the parties had come “anywhere close” to identifying the savings they needed, with the Lib Dems having come up with about a quarter, the Tories less than a fifth, and Labour an eighth.
“For the voters to be able to make an informed choice in this election, the parties need to explain clearly how they would go about achieving it. Unfortunately, they have not,” he said.
“The opposition parties have not even set out their fiscal targets clearly. The blame for that lies primarily with the Government for refusing to hold a spending review before the election.”
According the IFS estimates, Labour will have to find further tax rises worth £7bn (€8bn) a year in order to meet their plans, while the Tories would need an extra £3bn (€3.46bn)to meet theirs.
While the Conservatives would need to find cuts of nearly £64bn (€73.8bn) a year by 2014-15, Labour would need almost £51bn (€58.8bn) and the Lib Dems almost £47bn (€54bn).
Labour and the Lib Dems aimed to start reining back spending next year, saving £71bn (€81.8bn) a year by 2016-17, the Tories would begin cutting this year, and complete the process a year earlier.
“This would make the tightening even more front-loaded than it already is, at a time when the recovery remains fragile and the effectiveness of monetary policy remains under debate,” Mr Chote said.
“But it would not make an enormous difference to the long term outlook for the public finances.”
Mr Chote was dismissive of “misleading” claims by the parties that they could achieve significant spending reductions through efficiency savings.
Measures announced so far by Labour were “not an attractive package”, but the Conservatives’ plan to scrap the bulk of the planned NI increase “would not improve matters”, while the Lib Dem plan to restrict pension relief was “misguided”.
Treasury Chief Secretary Liam Byrne defended Labour’s plans, saying they had been forced to raise borrowing due to the fall in tax revenues following the global financial crisis.
“The Labour Party has set out a year by year plan for getting the deficit down over the next parliament. The public are left guessing what the Conservatives’ and Lib Dems’ approach to the deficit would be,” he said.
For the Tories, shadow Treasury chief secretary Philip Hammond attacked Gordon Brown’s “cynical decision” not to hold a spending review in order to hide the scale of the cuts that would be needed.
“Labour claim they want to talk about policy but refuse to publish the figures and refuse to debate the issues,” he said.
“People will conclude that Gordon Brown doesn’t want anyone to know the truth about the consequences of his economic failures.”
Lib Dem Treasury spokesman Vince Cable said the IFS analysis was a clear vindication of their policies.
“The IFS clearly shows that the Liberal Democrats have gone further than any party in identifying the savings that will be needed to tackle the structural deficit,” he said.