IFS warns on unprecedented spending cuts

The Institute for Fiscal Studies says the scale of spending cuts facing Britain is almost without precedent as it calls for tax cuts to avoid recession

Independent think-tank the Institute for Fiscal Studies has warned that Britain is facing spending cuts "almost without historical or international precedent".

"The sheer scale of the cuts is daunting," the IFS said. Based on official figures it estimates suggest that since the start of the financial crisis and recession, a £114bn hole in the public finances has emerged.

This is £23bn more than was thought last March and what has prompted chancellor George Osborne to pencil in two more years of severe spending cuts in 2015–16 and 2016–17.

However in its annual “Green Budget”, the IFS warns that they represent the biggest sustained cuts seen in the UK since the Second World War.

The IFS' economic forecast, produced by Oxford Economics, also provided grim reading. It said the outlook for the UK economy is bleak and the economy is expected to grow by just 0.3% in 2012/13. The euro zone crisis poses the biggest risk to the UK economy.

Osborne, who will deliver his next Budget in March, is under increasing pressure to unveil tax cuts to boost the economy while remaining on course to meet his fiscal mandate.

The IFS suggests that National Insurance or VAT could be reduced by up to £20bn to help steer the economy away from recession.