The age of austerity is only just beginning

Britain's public services face the "longest, deepest, sustained period of spending cuts since at least the Second World War", according to the independent Institute for Fiscal Studies (IFS). Never before in peacetime has the public sector seen budgets reduced every year for six years. Some departments will face cutbacks of a third.

While George Osborne gave some detail in his Budget, the full extent of the cuts across government will have to await the spending review in the autumn.

Unprecedented sums must be found, and "very deep cuts" made to services hitherto taken for granted. All the indications are that universities will face some of the toughest discipline, raising the possibility of the merger or closure of some institutions.

Confirming the worst fears of many working for the state and local government, the IFS said that the scale of the Chancellor's ambitions and the "ring fencing" of some departments meant that cuts of a third would be required from non-protected areas such as the universities, the Home Office, the criminal justice system, transport and housing.

There may also be a renewed assault on the benefits budget, following the £11bn a year Mr Osborne is looking to save by freezing child benefit and capping housing benefit. Given also that the Chancellor said that he wanted the cuts to be on "current" rather than "capital" spending, it is likely that the bulk of the cuts may focus on reducing the number of jobs and a prolonged period of public sector pay restraint – a policy not seen since the 1970s. The cuts would take public spending as a percentage of national income to where it was in 1997, eliminating Labour's increases.

The IFS congratulated the Chancellor on his "transparency", but challenged his statement that non-protected departmental spending would be cut by 25 per cent, rather than the 20 per cent planned by Labour. The Government's pledge to protect overseas aid and NHS spending, and promise to restore the earnings link with pensions, restrains its manoeuvrability. Ministers hint that schools and defence spending may face more modest economies, of say 10 per cent. In those circumstances, cuts to higher education, the Home Office and other arms of the state could rise to a third.

The size of the adjustment to spending that will be needed, and the impracticality of some of the cuts being demanded, may prompt a softening in the Government's pledges to protect some areas of spending. The "age of austerity" is beginning.

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