Labour ‘could add £170bn more debt’

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Published: Tuesday 13th January 2015 by The News Editor

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Labour’s spending plans risk adding £170 billion to the national debt over 15 years while the Conservatives are on a course to cut unprotected budgets by more than a quarter, a leading economist has warned.

In analysis of the positions set out by the parties for governing after the general election, Paul Johnson suggests Ed Miliband’s proposals could leave the country hamstrung in the event of a fresh recession.

Easing spending cuts could mean borrowing up to £50 billion a year more by 2020 than the Conservatives, the director of the respected Institute for Fiscal Studies (IFS) think-tank said in an article for The Times.

Voters will face a choice between Conservative plans to cut at least £33 billion or £7 billion under Labour, he said.

Tory plans mean many Whitehall departments face cuts of 41% over the course of this decade, he added.

Mr Johnson wrote: “Lest there be any doubt, there is a big difference between £7 billion of cuts and £33 billion of cuts.

“If you take the plans set out in the autumn statement at face value, spending cuts of more than £50 billion could be required after 2015/16.”

He added: “The problem is that another recession will strike one day. Going into a new recession with debt still high – and it is higher now than at any time since the late 1960s – could leave less room for manoeuvre.

“The sort of additional borrowing that we are able to support as we made our way through the recent period might not be as easily financed.”

Conservative plans will prove tough to deliver, Mr Johnson suggested.

He wrote: “Under the autumn statement plans, Conservatives could be cutting unprotected budgets by 26% after 2015/16 or an extraordinary 41% over the period from 2010.

“Even just to meet their more modest fiscal target, these budgets would need to be cut by more than 15% after 2015/16.

“Labour would need to implement cuts of just 3%.”

He pointed out that Conservatives would want to achieve a surplus on the overall budget and do not want to borrow to invest.

“That means they would need to find spending cuts of around £33 billion after 2015/16,” he added.

Published: Tuesday 13th January 2015 by The News Editor

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