2% cut needed in public spending to tackle debt

PUBLIC spending must be tightened by at least 2 per cent a year in real terms over the next five years to cope with the UK's deficit, according to an economic report published today.

Accountancy firm Deloitte's latest economic review suggested that fiscal tightening worth at least 5 per cent of the UK's annual gross domestic product (GDP) – or about £70 billion – will be needed to address the country's debt mountain.

Deloitte said public borrowing is set to rise to some 15 per cent of GDP this fiscal year, more than twice the levels seen when the UK was forced to seek the support of the International Monetary Fund in the 1970s.

Roger Bootle, the firm's economic advisor, said: "The great squeeze is going to hurt. But it's not all bad news.

"The widespread consensus that drastic action is needed and justified to sort out the fiscal position presents the authorities with a once-in-a-generation opportunity to remodel the UK economy and to reduce its dependence on the state."