By David Milliken
LONDON (Reuters) – British finance minister Rachel Reeves will face a tough task to meet the new fiscal rules on borrowing and debt which she has set herself in her first budget, the non-partisan Institute for Fiscal Studies said on Thursday.
“There is almost no wiggle room against the two new fiscal targets,” IFS Director Paul Johnson said.
“She is meeting her borrowing target only by repeating the same silly manoeuvres as her predecessors used to make it look as if the books will balance,” he added.
Budget forecasts assume that the government will raise fuel taxes next year – which no British government has done since 2010 – and that public spending growth would slow after two years of bigger rises.
“That’s not going to happen. The spending plans will not survive contact with her cabinet colleagues,” Johnson predicted.
Britain’s Office for Budget Responsibility estimated that Reeves only had 10 billion pounds ($13 billion) of headroom against a goal to balance day-to-day spending against tax revenue in five years’ time. A second goal to reduce public sector net financial liabilities as a share of gross domestic product only had 16 billion pounds of headroom.
The IFS did welcome Reeves decision to focus on long-term investment that might only pay off in the longer term and said Britain’s previous Conservative government had left the public finances in a poor state with unaffordable tax cuts.
“The last government must take a lot of the responsibility. Its spending plans for this year and for the future lacked credibility,” Johnson said.
($1 = 0.7698 pounds)
(Reporting by David Milliken, editing by Andy Bruce)
