Together, a decade of loose public spending, fiscal stimulus and the aftermath of the financial crisis left Britain with the highest deficit in its post war history at 10.2% of GDP. Even half a decade later, that deficit is only half closed, and remains high internationally.
Given that much of the damage to the UK economy is expected to be permanent – we will never recover the growth we have lost – we had little choice but to embark on an equally historically large fiscal consolidation to bring the budget back into balance.
In this paper, we look at the experience of fiscal consolidation so far, and how to approach the remainder of the task:
- What should be our medium term fiscal target, and how fast should we be paying down debt? Do we need to keep going until the deficit is literally zero, or can we get away with stopping when the deficit is back at its mid 2000 levels?
- Where have the savings come from so far, and what has been the impact on public services? How hard are the remaining savings likely to be to find?
- How can we better manage the process of finding savings? How can we take advantage of the power of transparency, digital and devolution to increase efficiency and reduce costs?