Research by the Institute for Public Policy Research (IPPR) argues that the state of the public finances, combined with the stuttering economy and the coalition’s fiscal targets will throw up difficult spending decisions.
It estimates that the Department for Education’s (DfE) budget will need to be trimmed by as much as £6bn between 2015/16 and 2016/17, if the health budget is protected, or by £3.7bn, if £10bn of savings are made from the welfare budget.
Richard Darlington, spokesman for IPPR, said it appears that the current “best case scenario” for the DfE will be a £3.7bn cut, unless the government opts to raise taxes or deviate from its austerity plan.
“It terms of service cuts it is quite difficult to be precise but a second spending review would leave very little scope for efficiencies in education,” Darlington said. “Cuts to education would be very difficult to do without job losses.”
Darlington said potential welfare cuts are also likely to have a significant impact on children and families.
He claimed that government is unlikely to cut pension credit, the winter fuel allowance or working tax credits, leaving housing benefit, council tax benefit and possibly child benefit, as areas where savings could be made.
A two-year freeze on child benefit would save around £500m, while a freeze on all working-age benefits would save £4bn, but the combined effect would mean government missing its child poverty targets, Darlington said.
Two alternative options mooted by the IPPR would mitigate the need for such dramatic cuts: either an increase in taxes, or postponing deficit reduction plans for two years.
The latter would negate the need for £20bn in savings, allowing for a reduction in the scale of departmental budget cuts and a freeze on welfare spending.
A spending review is anticipated for next year, although there is speculation it may only cover one financial year, if the coalition government is unable to agree spending plans for two years after a general election in 2015.