The Chancellor of the Exchequer, George Osborne, has said that there is a chance of more public spending cuts being announced in the Budget next month.
Speaking to the BBC, the Chancellor said that the tumultuous state of the global markets and a slowdown in growth could mean that “we may need to undertake further reductions”.
The last spending review saw the chancellor decrease the rate of spending cuts. However, due to the economy having shown less growth than initially predicted it is now believed that the budget on 16 March could signal a new wave of austerity.
The Chancellor said:
“The economy is smaller than we thought in Britain and we also know that global risks are growing and Britain is not immune to those things.”
The Shadow Chancellor John McDonnell said that the state of the British economy was a “total humiliation” for George Osborne.
In an interview with Laura Kuenssberg, the BBC political editor, during a state visit to China, George Osborne stated that he would follow the strategy of larger cuts in this Budget instead of risking the possibility of breaking his manifesto pledge- to achieve a government surplus by the year 2020.
Mr Osborne did not layout any details describing what these cuts would look like. Instead he simply stated that the conservative government would not break their manifesto pledges to protect some departments.
He also refused to rule the potential use of tax rises as a way to deal with further declining growth. However he did state that this did not represent the correct time for “significant” tax increases.
It is understood that the chancellor will be aiming to streamline the effectiveness of several government departments but does not want to increase the level of cuts by too large a margin. His self-professed aim is to “root our country in the principle that we live within our means” and would set out his strategy to tackle this in the budget.
Mr Osborne continued:
“Britain is still doing better than most countries but that’s because we have an economic plan that says that we spend what we can afford.”
The reason the Mr Osborne gave for the necessity of more spending cuts was the fact that the international economy had become “markedly worse”. He also said that the British economy needs to become more productive and the ONS showed that this still has not happened.
He went on:
“Because of all of those things, we have to respond to those events.
“So that’s what our plan is rooted in and it may require further reductions in spending.
“I’ll address that in the Budget but people should know this of me: I will do what is required to keep our country safe and secure.”
He added that the “whole purpose of our economic plan was to have a budget surplus”.
The Chancellor also stated that the cuts would only be decided upon once he has received the official figures from the OBR (The Office for Budget Responsibility).
It is believed that the majority of these extra cuts will be made somewhere towards the end of this Parliament, before the year 2020.
The BBC Political Editor, Laura Kuenssberg, said that Osborne has clearly decided to stick to his initial target and will not be considering the possibility of a change of strategy.
“The chancellor wants to keep to his self-imposed rule of getting the books into surplus by the end of the Parliament. He could relax that rule and slow down the pace of the cuts but that’s not what appears to be on his agenda.
“Instead, it seems he’d rather find the money somewhere.
“He wouldn’t say where he’d look for cuts, but you can assume departments ministers have already pledged to protect will be safe from further austerity.
“That of course means potentially tighter squeezes elsewhere.”
Back in November, George Osborne used his Budget announcement to slowdown his plan to make £4.4bn cuts to tax credits and also reduced his plans to to tighten the strings on the Home Office and a few other government departments. Now however, the Chancellor says that he is “going to have to look at public spending again”.
One of the biggest reasons that the Chancellor could get away with this was the fact that the amount of money that had been raised through income tax receipts was higher than previously expected, he was also helped by the lower interest payments being made on government debt.
One potential reason that George Osborne may be so determined to have the UK running a surplus by the year 2020 is the fact that he may then be considering running for the job of Prime Minister. If this were to be the case, then having a budget surplus would be his way of proving his reliability to the British public.
The Chancellor continued to say that his reason for wanting to revisit the notion of spending cuts is so that the UK doesn’t get caught out by a change in global conditions.
“We’ve got to make sure that we run a budget surplus as a country so that we’re prepared for whatever the world throws at us.”
The chancellor denied the idea that he had been “caught out” by the way that the economy had gone since his last budget and said that the government would continue to try to deliver its manifesto pledge.
“We’ve taken judgements to get that budget surplus and now of course as the global economy gets more difficult, and I think everybody accepts that things have got more difficult since the start of the year- as more information has come out, we make sure that the essentials of our plan that is that Britain lives within its means and that it can only spend what it can afford, those things are applied to our public expenditure.”
However the Shadow Chancellor, John McDonnell, said that ultimately it would be the British public who would foot the bill for the failures of Mr Osborne.
He stated that:
“[George Osborne] sneaked off to China to admit what Labour have been saying for months – that his recovery is built on sand”.
“Far from paying our way, Osborne’s short-term economics means Britain is deeper and deeper in hock to the rest of the world.”
“If the bankers’ chancellor had been doing his job properly he would be collecting taxes from Google and other tax-dodgers.
“Instead he is threatening the British people with paying an even higher price for his own failures.”
In recent times, the Treasury has come under fire from a government select committee for putting pressure on the OBR (The Office for Budget Responsibility) to alter the language that it used in an economic report. The Treasury has yet to make an official response.
The report release by the Treasury Select Committee said:
“It is concerning that Treasury officials did not recognise that these requests were inappropriate. They appear to have been made routinely at previous fiscal events.”
“It is far from clear why Ministers should have the opportunity to offer views to the OBR during the exceptional pre-release access period when, given the level of technicality, it is highly unlikely that they could make constructive contributions to any fact-checking and quality assurance process.”
“A number of Treasury requests for non-factual changes appear to have been taken on board by the OBR. This is unacceptable.”
“The removal of words such as “topslice” to describe spending cuts, and “complicated” to describe the then Government’s fiscal assumption, cannot be held to have improved the clarity of the economic and fiscal outlook, nor did they make it more factually accurate.”
“Nonetheless, the committee is satisfied that, on this occasion, the changes the OBR made in response to Treasury requests made no material difference to the analysis contained in the final document.”