Just when you thought it couldn’t get any worse it does. An independent analysis suggests that Communities and Local Government will be one the departments hardest hit by Labour plans to cut public spending after the next election that amount to the biggest squeeze since the 1970s.
The Institute for Fiscal Studies (IFS) says that most central government departments will see significant real cuts as overall departmental expenditure limits (DELs) ares cut by 8.6% or £32.9bn over the next spending review period between 2011-12 to 2013-14. And it says capital intensive departments are likely to be hardest hit as investment spending is cut sharply while current spending grows modestly.
‘Capital-intensive departments such as Transport and Communities and Local Government (who are involved with local housing) are likely to be particularly concerned,’ adds the IFS.
Transport accounted for 22% of total gross public sector investment in 2008/09 and housing for 19%. ‘With public sector net investment being cut so sharply over 2011/12 to 2013/14 these departments will almost certainly be among the hardest hit.’
The IFS says the only way to avoid the squeeze is tax increases or welfare cuts. But with the spending position even worse than it envisaged in January, when it forecast the CLG would see cuts of 4% a year in real terms in the next three years, none of the options look good.
Two Tory think-tanks proposed even bigger cuts but with apparent protection for the new homes budget.
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