Osborne challenged over plans for cuts

Chief Secretary to the Treasury Danny Alexander holds his yellow budget box after presenting an alternative set of fiscal plans in the House of Commons
Chief Secretary to the Treasury Danny Alexander holds his yellow budget box after presenting an alternative set of fiscal plans in the House of Commons
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George Osborne has been called on to explain how he will achieve large cuts sketched out in the Budget - or leave voters guessing whether public services were heading for deepening post-election austerity.

Forecasts from the Office for Budget Responsibility (OBR) suggest the plans to cut back the deficit before ending austerity a year early will mean a “rollercoaster” ride for public services, with a tightening squeeze followed by a spending splurge.

Analysis suggests the cuts in 2016/17 and 2017/18 of more than five per cent would be twice the size of any so far achieved by the coalition.

The Chancellor claims this does not take account of £12 billion of welfare cuts and £5bn in anti-tax avoidance measures he is planning.

In a post-Budget briefing, Mr Osborne was urged by the head of the Institute for Fiscal Studies (IFS) to be clearer about his plans.

IFS director Paul Johnson said: “The Chancellor argues that because he is committed to £12bn of welfare cuts and £5bn of anti-tax avoidance measures, the required cuts to public service spending are much more modest.

“But if he really wants us to believe that, he needs to be more explicit about how he actually thinks he can cut welfare spending and raise substantial additional sums from clamping down on tax avoidance.

“My guess is that even under a majority Conservative government, annual cuts in public service spending will not turn out much more dramatic than those we have seen over this parliament.

“We won’t be on the OBR’s rollercoaster. But it is a terrible shame that, despite all the mass of information... I am left guessing.

“Whitehall departments are going to have to plan for some dramatically different scenarios, one of which they will have to implement in just 12 months ‘ time.”

Mr Osborne said in his Budget speech that he was taking Britain “one more big step on the road from austerity to prosperity”.

He said that because national debt was now expected to be falling a year earlier than previously expected, the squeeze on public services would end a year earlier too, and it would grow in line with the economy from 2019/20.

OBR forecasts suggest this would mean a planned surplus for that year falls from £23bn expected at the time of last December’s Autumn Statement to £7bn.

Mr Johnson said: “The apparent change in economic philosophy in the three months since the Autumn Statement is pretty remarkable.”

The Chancellor’s pledge appeared designed to blunt the political impact of the OBR’s analysis of his previous plans which would have seen public spending as a proportion of gross domestic product (GDP) fall to its lowest level since the 1930s.