However, the IFS yesterday warned of a great deal of uncertainty over fiscal forecasts.
To achieve a budget surplus the UK needs “cuts on a colossal scale… taking total government spending to its lowest level as a proportion of national income since before the last war,” said IFS director Paul Johnson.
Forecasts in 2010 foresaw a deficit of £40bn this year but the government has missed that. Not due to a lack of cuts, the IFS say, but due to lower-than-expected tax revenues. The proposed cuts should lead to a balance budget by 2020, official forecasts say.
But the IFS warns official predictions depend on income tax receipts being revised down – they have been difficult to predict in the past. The interest paid on government debt has also been revised down by £16bn due to lower borrowing costs.
“If nothing else the scale of these changes should remind us just how uncertain fiscal forecasts really are,” Johnson said.