Experts study Osborne mini-budget

Experts study Osborne mini-budget

George Osborne said painful cuts would continue until at least 2018

George Osborne said painful cuts would continue until at least 2018

First published in National News © by

The impact of George Osborne's prolonged austerity drive is to come under close scrutiny amid Labour claims that the working poor will be hit hard.

Verdicts on the Chancellor's benefits squeeze and other measures will be delivered by bodies including the respected Institute for Fiscal Studies think-tank.

In a bleak Autumn Statement on Wednesday, Mr Osborne said painful cuts would continue until at least 2018, as Britain's faltering economy went into reverse. "The road is hard but we're making progress," he assured MPs.

Most working-age benefits will rise by a below-inflation 1% for three years to slash £3.7 billion from the welfare bill and another £1 billion will come from a raid on the pensions of the wealthy.

Raising the threshold for the 40% income tax rate by just 1% will raise another £1 billion but help drag 400,000 more middle-income earners into the higher bracket by the end of the parliament. Sweeteners included scrapping a planned 3p-a-litre rise in fuel duty, a 1% cut in corporation tax and changes to allowances which will take earnings below £9,440 out of income tax altogether.

Labour said that the package of benefit and tax changes announced yesterday meant a working family with children on £20,000 a year would lose £279 a year from April. The party said it was awaiting the detail of legislation required to effect the three-year benefit squeeze before declaring whether it would oppose the measure.

Mr Osborne was also forced to admit that the independent Office for Budget Responsibility now believes he will miss his target for debt to start falling as a proportion of GDP from 2015/16. That sparked a caution from one credit ratings agency over the chances of Britain retaining its cherished AAA rating when it is reviewed next year. Fitch said it expected that by 2015 debt would now be "approaching the upper limit of the level consistent with the UK retaining its 'AAA' status".

The Chancellor later downplayed suggestions Britain could lose its AAA credit status. He told BBC Breakfast: "It wouldn't be a good thing but the credit rating is one of a number of ways in which people look at countries."

Defending Government actions and saying there were other gauges of how the country's financial health should be judged, he said: "We are borrowing money at the moment at some of the lowest rates in British history. When people look around the world and look at countries to invest in they think Britain is a good investment."

The OBR downgraded its forecasts for GDP growth in each of the next five years, predicting that the economy will shrink by 0.1% in 2012, rather than growing by 0.8% as they expected in March. But Labour said the Chancellor was only able to declare good news on borrowing because his figures include an expected £3.5 billion windfall from the auction of 4G telephone spectrum, even though it has not yet happened.

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