Ministers are unlikely to achieve their goal of halving child poverty by 2010, the public finances are suffering from "underlying weakness", and the Government is in grave danger of breaking its own fiscal rules, according to an analysis of the Budget by the independent Institute for Fiscal Studies (IFS).
The Treasury says the Budget has ploughed £870m into anti-poverty measures. Even so, the IFS claims that the Government will break its promise and that some 450,000 children will still be growing up in poverty in 2010, despite Gordon Brown's and Alistair Darling's efforts to help them. A further £2bn to £3bn is needed, says the IFS, if the Government "wishes to give itself a reasonable chance of hitting its child poverty target". It pointed out that the Government has already missed its interim target of cutting the number of children in poverty by 2004, and that the number of children growing up in poverty rose in 2005 to 2006. The Government has said it will abolish child poverty by 2020. According to the IFS, at the time of the pre-Budget report the Government was likely to miss its 2010 target by 700,000 children; now it will still be missed, but by 250,000 fewer.
More widely, the IFS says there has been an "underlying deterioration" in the public finances of about £7.5bn since the publication of the pre-Budget report last October, which it says Mr Darling has chosen to address by raising taxes by £2bn per year, but that more than £4bn will be found through a more aggressive squeeze on public spending, to be announced in next year's public spending review.
Thus the IFS says that Mr Darling will seek some £8bn in cuts to spending plans over the two years covered by the spending review, though at least some of these will not take effect until after the next general election. Even as things stand, Mr Darling will be forced to borrow £43bn next year and will be within a whisker of breaching the Government's sustainable investment rule, which is to keep the national debt at less than 40 per cent of the national income.
The IFS says that Mr Darling has a mere £2.7bn of "headroom" between his plans and the rule – a tiny amount in a state that spends £618bn – well within the Treasury's normal margin of error for borrowing, of £13bn. Reflecting on the political difficulties facing ministers, Robert Chote, head of the IFS, said: "If there is a fiscal repair job to be done, Mr Darling and Mr Brown may be leaving it until after polling day."