SMF Briefing: Spending Choices after 2015 – A Deficit of Growth II

Ahead of the Chancellor’s 2014 Autumn Statement, the SMF published A Deficit of Growth: Spending choices after 2015, with analysis showing the extreme sensitivity of the deficit to the performance of the economy, and the challenge ahead for the next Government.

In this update of our original briefing, we firstly set out the different parties’ fiscal targets and compare them against the OBR’s December forecast. We then go on to show how success depends on assumptions of economic growth: if productivity growth does not show a sustained improvement in the next five years, even the substantial spending cuts already planned will not be enough to meet the three parties’ deficit reduction targets. Finally, we briefly discuss the challenging trade-offs that will be faced by the next Government.


  • Meeting deficit reduction targets is highly dependent on much greater productivity growth than we have seen so far
  • If productivity growth continues at the same slow pace seen since 2008, the Conservatives, Labour and the Liberal Democrats will all miss their targets
  • Under this scenario, the Conservatives would have the most difficulty meeting their deficit target. If they still wanted to balance the books by 2018-19, they would need to roughly double the spending cuts outlined in the Autumn Statement.


  • The need for sustained economic growth means that it is vitally important that the next Government takes a growth-friendly approach to spending cuts.

Download The Report: PDF

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