'Eight years of pain ahead' from spending cuts

Britain faces "eight years of pain" as the Government seeks to cut the nation's overdraft, experts warned today.

The Institute for Fiscal Studies forecast cuts in many areas of more than 16 per cent from 2011 to 2014 if expenditure on the NHS, schools, defence and overseas aid is to keep rising. But cuts or tax rises will have to last longer if Labour, or the Tories, are to meet a target of reducing the deficit from 11.9 per cent of GDP next year to 1.3 per cent by 2018.

"It could be eight years of pain," said IFS deputy director Carl Emmerson. "Under Labour spending plans at the moment, it is the tightest three years since 1977 when the IMF were involved in setting spending plans in the UK."

Chancellor Alistair Darling has moved to tackle the debt mountain, including a new 50p tax rate on the rich, but the IFS says there is still a £45billion black hole in his plans to balance the books.

Former Tory Chancellor Lord Lawson, who is advising David Cameron, said if the Conservatives win the election they should hold an emergency budget, as Lady Thatcher did in 1979.

"To wait until the following March or April would be disastrous," he said. With public finances in a "terrible mess", he said, the markets would need to see the Tories were serious about balancing the books, which would help the Government avoid paying high interest rates on its borrowing.

Lord Healey, Labour Chancellor from 1974 to 1979, praised Gordon Brown's handling of the crisis but warned of deep cuts in public spending. He said: "It is always painful to many people depending on what area you cut."