Leaked Treasury figures imply that the UK is about to embark upon the tightest squeeze on public spending since the IMF-imposed cuts of the late 1970s, a leading economic think tank has said.
The cuts could see Labour's increases in spending on public services over the past 12 years completely wiped out, unless a future administration chooses to increase taxes or slash benefits instead, warned the Institute for Fiscal Studies (IFS).
To avoid returning to public spending levels last seen under the previous Conservative administration, the Government would have to raise taxes or cut benefits by a total of £29 billion - or £930 per family - a year, said the IFS.
The leaked Treasury estimates, made public on Tuesday by Conservative leader David Cameron, envisage annual cuts in expenditure by Whitehall departments of 2.9% in real terms between 2011 and 2013 in order to meet Chancellor Alistair Darling's goal of halving the £175 billion deficit within four years.
Tories claimed the paper, prepared at the time of the April Budget and marked "confidential", raised questions over whether Gordon Brown was being honest in the run-up to the summer recess, when he repeatedly accused the Conservatives of planning 10% cuts in public spending and denied Labour would do the same.
Downing Street said Mr Brown would "never mislead Parliament", but Mr Cameron said the Prime Minister must now explain his comments in the House.
"They're not wrong to be planning cuts, they're wrong to try to cover up their plans for cuts," said Mr Cameron. "This is about honesty. This is about trust. This is about not taking people for fools."
Government officials stressed that no spending plans had been fixed beyond 2010/11, because of the current economic uncertainty.
The Treasury confirmed on Tuesday night there would be an inquiry into the leak.
The paper, prepared by Treasury officials, sets out projections for Government income and expenditure over the next four years. One table shows that spending limits for Whitehall departments are set to fall in real terms by 0.8% in 2010-11, 4% in 2011-12, 1.8% in 2012-13, and 3% in 2013-14.
