A pedestrian walks past the Bank of England (BOE) in the City of London, U.K. (Photographer: Simon Dawson/Bloomberg)

Austerity to Continue for Most U.K. Government Departments

(Bloomberg) -- U.K. Chancellor of the Exchequer Philip Hammond needs to find billions of extra pounds if most government departments are to avoid years of further austerity, according to new research published Monday.

With the government pledging an extra 20 billion pounds ($26 billion) for the National Health Service and defense and overseas aid protected from real-term cuts, other ministries face further budget restraint under the broad spending plans set out in the Autumn Budget.

These departments have already seen their allowances cut by 40 billion pounds since 2010, the Institute for Fiscal Studies said in a report ahead of Hammond’s Spring Statement on March 13. However, future cuts would be much smaller in scale.

An additional 5 billion pounds would be required to avoid any cut to real-terms per capita spending by 2023-24, according to the report. Maintaining spending on unprotected departments as a share of national income would need 11 billion pounds. A spending review due to be announced later this year will allocate cash for each department for the period beyond March 2020.

The study also said the damage inflicted if Britain leaves the European Union without a deal may force the government to increase spending to protect the economy, though renewed austerity would eventually be necessary to balance the books by the mid 2020s, as Hammond plans.

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