A further 14 billion pounds of spending cuts are needed to meet the UK government target, according to a new analysis of Treasury figures that reveals the daunting scale of the shortfall caused by weaker-than-expected economic growth. The Guardian newspaper reported Thursday.
The cuts would need to come on top of 10bn of extra cuts already promised by the chancellor, Finance Secretary, George Osborne and amounts to the equivalent of 70,000 teachers, 10,000 police officers and 30,000 defence staff.
The shock estimate has been produced by the Institute for Public Policy Research (IPPR) think tank, to show the spending challenges facing all three parties, and the range of political decisions and trade-offs still to be made by party leaders, including the possibility of raising taxes.
If the chancellor sticks with his current "plan A", including protecting the National Health Service (NHS) and international development budgets, the IPPR estimates the education department would face 3.7 billion pounds cuts, defence would need 1.7 billion pounds, local government 1.6 billion pounds and the Home Office 500 million pounds.
The IPPR points out that the Treasury's current figures assume almost the entire fiscal consolidation in the two years 2015-16 and 2016-17 will come from spending cuts, and none from tax increases.
If the consolidation were met through 70 percent spending cuts and 30 percent tax rises, the kind of proportions likely to be favoured by Labour, this would require a 20 billion pounds tax rise.
A mansion tax, favoured by the Liberal Democrats and the shadow chancellor, Ed Balls, would raise only 2 billion pounds, 10 percent of the tax rises needed.
Ministers would have to raise VAT to 24 percent to gather 20 billion pounds. The alternative - pushing back the target to eliminate Britain's structural, or underlying, deficit, by two more years - would mean there was 20 billion pounds more room for manoeuvre but would risk provoking adverse reaction in the bond market, concluded the IPPR.
The IPPR projects borrowing would be higher in 2016-17 at 2 percent of GDP, rather than 1.1 percent under current plans.
Debt would also be slightly higher at in 2016-17 at 75.2 percent of GDP rather than 74.3 percent under current plans. This assumes the additional resources released in 2015-16 and 2016-17 are allocated to additional spending rather than tax cuts.
The IPPR's work is based on the numbers produced by the Office for Budget Responsibility at the time of the Budget.