Osborne forced to tear up Budget and plan big cuts
GEORGE Osborne is set to tear up his spending plans and impose billions of pounds more in cuts, it emerged last night.
The Chancellor said he will be forced to ‘look at public expenditure again’ in next month’s Budget, blaming ‘storm clouds’ in the ‘turbulent’ global economy.
It raises the prospect of swingeing new cuts to public spending just three months after the Chancellor delivered an unexpectedly upbeat Autumn Statement.
Last night critics accused the Chancellor of ‘ complacency’ for slowing down the pace of spending cuts last year.
In November, Mr Osborne used an unexpected £27billion windfall to soften austerity and abandon billions of pounds of tax credit cuts. He was criticised at the time for not using the money to pay off the deficit.
Yesterday – as it was confirmed MPs will get another pay rise of almost £1,000 per year – the Chancellor prepared the ground for new cuts so he hits his target of Britain spending less than it takes in tax by the end of the Parliament.
At a meeting of G20 finance ministers in Shanghai, China, he said: ‘The storm clouds are clearly gathering in the world economy and that has a consequence for lots of countries including Britain. Now, we are weathering it better than most but we’ve just had confirmation that our own economy is not as big as we had hoped.
‘So we may need to undertake further reductions in spending, because this country can only afford what it can afford. We will address that in the Budget, because I’m absolutely clear we’ve got to root our county in the principle that we must live within our means and we have economic security. That’s what people rely on.’
The Chancellor said he would ‘do what is required to keep our country safe and secure because in the end that is what peoples livelihoods and jobs rely on’.
‘We’ll set it out if we need to, how we’ll reduce spending, but the first place I look to is further efficiencies in government. There are always ways to make government better, always ways to make sure that the taxes of people are better spent.’ Mr Osborne did not rule out tax rises but said now was not the time for ‘significant’ tax hikes. He also pledged to fulfil the Tory manifesto tax cut and spending pledges.
‘All I’m talking about is going back to government budgets and saying where we can find that extra saving, that extra efficiency, that extra improvement in the public service that might release some money.’
The announcement will raise questions about the wisdom of November’s spending decisions, which forecasters said left little wiggle room in the event of a downturn.
Earlier this month, the Institute for Fiscal Studies thinktank warned Mr Osborne might need large spending cuts or new tax rises to balance the books.
His current spending plans leave him with a surplus of just £10billion forecast for the last year of the Parliament, they said.
Official figures on Thursday growth in the last three months of 2015 was just 0.5 per cent. Recent months have seen turmoil in global stock markets with billions wiped off the value of major firms.
Worries over slow growth in China and fears of another global financial crisis have combined to cause major jitters about the world economy. Yesterday the pound fell to a sevenyear low against the US dollar, tumbling as low as $1.3856.
Jonathan Isaby, of the TaxPayers’ Alliance, said: ‘It was complacent to slow down the pace of savings at the last Spending Review and spend money the Treasury didn’t have.
Shadow Chancellor John McDonnell said: ‘This is a total humiliation for floundering George Osborne. He has sneaked off to China to admit what Labour have been saying for months, that his recovery is built on sand.’