Tax rises and spending cuts will stretch beyond 2020 election

The Institute for Fiscal Studies suggests Chancellor Philip Hammond will still have to find £34bn of cuts despite setting himself looser targets on public spending than his predecessor.

IFS director Paul Johnson said: “For all the focus on Brexit the public finances in the next few years look set to be defined by the spending cuts announced by George Osborne.

“Cuts to day-to-day public service spending are due to accelerate while the tax burden continues to rise.

“Even so the new chancellor may not find it all that easy to meet his target of eliminating the budget deficit in the next parliament.

“Even on central forecasts that is going to require extending austerity towards the mid-2020s.

“The report, producing in partnership with Oxford Economics, found a three-year transitional deal with the EU followed by a free trade deal was likely to leave the UK economy three per cent smaller than would be expected in 2030.

Failure to secure a deal, leaving Britain operating under World Trade Organisation rules, would produce an outcome that was “worse still”.

A Treasury spokesman said: “The government is committed to repairing the public finances and living within our means so that we can build an economy that works for all. That has required some difficult decisions on spending, but we are determined to deliver efficient public services which provide maximum value for every pound of taxpayers’ money.”