The UK is in the fifth year of what is now planned to be a nine-year fiscal tightening. This fiscal consolidation is forecast to total £178 billion in today’s terms by 2018–19. This is £62 billion larger than was originally planned in the June 2010 Budget. In his first Budget, George Osborne outlined a plan to complete the fiscal consolidation by the end of next financial year (2015–16). However, worse-than-expected economic news over the last few years (coupled with the fact that he is now aiming to achieve a tighter fiscal position) has led to Mr Osborne increasing the size of the planned tax rises and spending cuts. As a result, even though Mr Osborne has implemented virtually all the policies he originally announced, the consolidation is not now expected to be complete until the end of 2018–19.
By the end of this financial year, 55% of the total consolidation is expected to have been implemented. However, within this nearly all the tax increases and cuts to investment spending will have been implemented, while only just under half of the cuts to non-investment, non-welfare spending will have been done. The figure below shows the size and timing of the currently planned fiscal consolidation as a share of national income. This shows the combined effect of tax and spending measures announced and implemented by the previous Labour government and the current coalition government since March 2008.
Figure: Timing and composition of the fiscal consolidation
Note: This Figure updates the numbers presented in Figure 1.2 of the 2014 IFS Green Budget to include the policy announcements made in Budget 2014 and some other changes to our methodology. The Green Budget contains details of the methodology and sources used to construct this figure. The data underlying this figure can be downloaded here.