POLITICS
24/10/2018 01:00 BST

Ending Austerity Will Cost Philip Hammond £31bn, Experts Claim

Current budget cuts are set to carry on into 2020.

ASSOCIATED PRESS

It will cost the the government £31bn to honour Theresa May’s pledge to end austerity in Monday’s budget, according to experts.

In her Tory Conference speech, the prime minister’s biggest pledge was a loosening of the purse strings, when she promised “the end is in sight” for cutbacks.

Current efficiencies are scheduled to continue into 2020 in order to bring the deficit into line. 

Chancellor Philip Hammond’s budget next week will be the first opportunity to see if the government is committed to May’s speech.

Ahead of the financial forecast, the Resolution Foundation think tank has calculated exactly how much ending austerity would cost.

First, the government would need to stop planned cuts to areas like the police and schools scheduled for 2019-2020 and maintain all of its commitments on the NHS defence and international aid. All of this would cost an extra £26.3bn by 2022-23, the report said.

Second, the government would need to end the final year of the benefit freeze – which has been in place since 2015 – costing around £1.5bn in 2019-2020 and a further £1.7bn in 2022-23.

If ministers committed to this, it would prevent low-income families losing around £250 next year, say economists. 

The final pledge the government would need to make would be to reverse the cuts to Work Allowances in Universal Credit – at a cost of around £3bn by 2022-23.

ASSOCIATED PRESS

The Chancellor has a difficult job on his hands having to balance the need to reduce the national debt, keep public finances protected against any Brexit uncertainty and now the commitment to end austerity. 

However, he may have some room to manoeuvre, with the Office for Budget Responsibility predicting lower than forecast borrowing in the first half of the year which may continue for the rest of the year.  This alone could hand Hammond a £13bn windfall. 

But even with the potential extra money, the Resolution Foundation predicts it will impossible for the Chancellor to make good on May’s pledge.

Deputy director Matt Whittaker said: “Ending austerity in relation to schools, hospitals and social security carries a huge price tag of over £30bn by the end of the parliament.

“Ending austerity, while also keeping debt falling as a share of the economy, will therefore require tax rises.”

However, Whittaker added: “Should strong recent public finances figures lead the OBR to deliver a £13bn windfall, the Chancellor’s ‘mission impossible’ may become ‘just about plausible’.”