Government criticised over public finances

THE Government faced an attack on its stewardship of the public finances today after the Institute for Fiscal Studies (IFS) said most other countries had done more to tackle debt before recession struck.

The respected think-tank said Labour had cut the level of borrowing and debt inherited from the Conservatives in 1997, but added the "vast majority" of other nations had gone further in strengthening public finances.

Its briefing note said: "While the UK public finances were in better shape when the financial crisis began than they were when Labour came to power, the UK was in a worse position relative to most comparable countries."

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The high debt levels going into crisis meant the UK would have "one of the weakest fiscal positions in 2010" after a deterioration in public finances only exceeded by Ireland and Iceland over the past three years, the IFS added.

Public borrowing is forecast by the Treasury to hit a record 167 billion for the 2009-10 financial year, although this is slightly lower than first estimated.

The Government aims to cut the deficit by more than half over the next four years, although it argues that spending cuts this year would endanger a fragile recovery.

Although the UK had the second lowest level of debt behind Canada among G7 nations going into the crisis, the IFS said the UK had the eleventh highest debt compared with other countries in the Organisation for Economic Co-operation and Development (OECD).

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The think-tank said: "On the eve of the financial crisis, the UK had one of the largest structural budget deficits among either the G7 or the OECD countries and a higher level of public sector debt than most other OECD countries, though lower than most other G7 countries.

"Most OECD governments did more to reduce their structural deficit during the period from 1997 to 2007 than Labour did. This fiscal position formed the backdrop to the financial crisis."

The UK reaped the rewards of a booming financial services sector before the credit crunch struck but finally emerged from its deepest and longest recession on record in the last three months of 2009 - later than most other countries.

"The UK - at least partly because of the relative importance of the financial sector for our public finances - has experienced a worse deterioration in its fiscal position than many other industrialised countries," the IFS added.

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Shadow Treasury chief secretary Philip Hammond said: "This report by the respected and independent IFS shows that the only time the public finances improved under Gordon Brown's regime was during the first few years, when he was following Conservative spending plans.

"The subsequent years of 'fiscal drift' left Britain with one of the biggest structural budget deficits in the developed world. This is a damning verdict on Gordon Brown's economic mistakes which left Britain badly prepared for the longest and deepest recession since the war.

"Even now Gordon Brown wants to carry on wasting taxpayers' money and is planning a jobs tax to pay for it that will kill the recovery."

"This independent demolition of Gordon Brown's record reinforces the need for change - and reminds us, once again, why Britain can't afford another five years of his debt, waste and taxes."