George Osborne has said there is “light at the end of the tunnel” for Britain’s economy, but insisted yesterday’s Spending Review does not mark an end to austerity.
The chancellor’s statement included shallower-than-expected cuts to public services, including real-terms protection for police budgets, and delays in reductions to the welfare bill after a U-turn on tax credits.
Upgraded public finance forecasts gave Osborne an extra £27bn to spend over the course of the Spending Review period, but he stressed that there was more pain to come.
“It’s not an end to the difficult decisions, that Spending Review,” he told the Today programme.
“There are going to be difficult choices for different government departments, billions of pounds of savings, billions of pounds of savings in the welfare budget as well.
“And this Spending Review sets out what Britain is going to do to stop borrowing, run a surplus, pay down our debt; it takes those difficult decisions in day-to-day spending so we can invest in the long term; and at its heart is this judgement that by taking these decisions – no more, no less – there is light at the end of the tunnel for Britain and we can have that economic and national security that our country needs.”
Abandoning the cuts to tax credits, which will mean the chancellor breaches his own welfare cap for the next three years, will not affect the long-term target to cut £12bn from welfare because they will be put in place when people move onto the new Universal Credit benefit.
Osborne described the climbdown as a way to “smooth the transition” to the same end point.
“We’re heading in the same direction, we’re just taking an easier path to it,” he told Today.
“I don’t think it’s a weakness if you’re doing a job like mine to listen to people and listen to the concerns that are made,” he added on ITV’s Good Morning Britain.
John McDonnell has said this morning Labour will shift its campaign to concentrate on the Universal Credit issue.
“He’s partially U-turned but not in a full or a fair way because on universal credits the cuts will still go ahead,” the shadow chancellor told ITV.
“These families will now move on to universal credits and what will happen, at least £1,000, if you’re a person with a disability maybe £2,500, if you’re a lone parent £2,500. So it’s a typical George Osborne trick: he does the big thing about U-turning but actually he’s only partially U-turned and people still lose out.”
“Wiggle room”
Meanwhile, Paul Johnson, director of the Institute for Fiscal Studies, stressed that yesterday’s announcements still amounted to one of the toughest sets of cuts to government spending in the last five decades and did not mark “the end of austerity”.
Osborne said the Office for Budget Responsibility calculated that he had £27bn more to play with over the spending review period than anticipated in July.
But Johnson said a more useful figure was £5bn.
“That £27bn number is a silly number and one that shouldn’t really be used because it’s one of these numbers that accumulates stuff over five years and the actual number in an individual year is much less, it’s £5bn or £6bn,” he told the Today programme.
“It’s a small change of a few billion, but that actually allows him quite a lot of wiggle room on his cuts to the unprotected departments, which were the bits that were always going to be hit and the reason it gives him quite a lot of wiggle room is that that’s quite a small amount of overall spending.”
He added: “We are still in a world in which overall spending is falling from about 40% of national income to just over 36% of national income. This may not be quite as tight as the last Spending Review but it’s still the tightest Spending Review in the last 50 years apart from the last couple of Spending Reviews – so this is still very, very tight.”