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| Autumn Statement: More spending cuts 'on the cards' | Autumn Statement: More spending cuts 'on the cards' |
| (35 minutes later) | |
| Further welfare cuts and tax rises "must be on the cards" to make the government's numbers in the Autumn Statement add up, according to the Institute for Fiscal Studies (IFS). | Further welfare cuts and tax rises "must be on the cards" to make the government's numbers in the Autumn Statement add up, according to the Institute for Fiscal Studies (IFS). |
| Spending cuts announced on Wednesday are "close to inconceivable", it said. | Spending cuts announced on Wednesday are "close to inconceivable", it said. |
| This is because if departments such as the NHS and schools are protected, unprotected departments would end up having to make cuts of more than 30%. | |
| IFS director Paul Johnson said further cuts could target pensioners' benefits. | IFS director Paul Johnson said further cuts could target pensioners' benefits. |
| "There are big choices on health and welfare, crucially surely including benefits for pensioners, still to be made," he said. | "There are big choices on health and welfare, crucially surely including benefits for pensioners, still to be made," he said. |
| The basic state pension is set to rise by 2.5% from April, according to government rules, while other benefits are limited to 1% rises. | The basic state pension is set to rise by 2.5% from April, according to government rules, while other benefits are limited to 1% rises. |
| The IFS said that it was already clear that in next year's budget, with the NHS and welfare again to be protected from cuts, other departments - such as police, local government, defence, environment and transport - would face cuts of another 3.2%, on top of the 21% cuts they have already undergone since the 2010-11 tax year. | |
| If the NHS and welfare continue to be protected, then by 2017-18 the cumulative cuts would reach 31.5%, a level that Mr Johnson considered "inconceivable". | |
| In his Autumn Statement, George Osborne said that the details of individual departmental cuts would be fleshed out in a Spending Review next year. | |
| 'Unprecedented' spending cuts | 'Unprecedented' spending cuts |
| However, in its review of the Autumn Statement, the IFS cautioned that the benefit cuts announced by the chancellor on Wednesday may not actually save the government any money, given the other changes presented. | However, in its review of the Autumn Statement, the IFS cautioned that the benefit cuts announced by the chancellor on Wednesday may not actually save the government any money, given the other changes presented. |
| "Welfare cuts over the next couple of years largely pay for two tax cuts," said Mr Johnson, "the cancellation of the fuel duty increase and the further increase in the income tax personal allowance." | "Welfare cuts over the next couple of years largely pay for two tax cuts," said Mr Johnson, "the cancellation of the fuel duty increase and the further increase in the income tax personal allowance." |
| Such was the detail revealed in the Autumn Statement, that Mr Johnson said that "the idea that there is only one Budget a year has been laid pretty firmly to rest". | Such was the detail revealed in the Autumn Statement, that Mr Johnson said that "the idea that there is only one Budget a year has been laid pretty firmly to rest". |
| At the heart of Mr Osborne's budgetary difficulties was the fact that the Office for Budget Responsibility (OBR) was "forecasting that the economy will be 3.6% smaller in 2016-17 than it had thought back in March", the think tank head said. | At the heart of Mr Osborne's budgetary difficulties was the fact that the Office for Budget Responsibility (OBR) was "forecasting that the economy will be 3.6% smaller in 2016-17 than it had thought back in March", the think tank head said. |
| It meant that the chancellor had, in effect, to abandon one of his two fiscal rules - namely that the country's debt should be falling as a percentage of GDP (annual economic output) in 2015-16. | It meant that the chancellor had, in effect, to abandon one of his two fiscal rules - namely that the country's debt should be falling as a percentage of GDP (annual economic output) in 2015-16. |
| It also meant that he would have to impose a further, eighth year of spending cuts in 2017-18. "That is even more unprecedented than the unprecedented seven years of cuts announced last year, itself superseding the unprecedented five years originally announced," said Mr Johnson. | It also meant that he would have to impose a further, eighth year of spending cuts in 2017-18. "That is even more unprecedented than the unprecedented seven years of cuts announced last year, itself superseding the unprecedented five years originally announced," said Mr Johnson. |
| The institute also pointed out that this year's predicted fall in the deficit - how much the government has to borrow this year due to its overspending - from last year's level has only been made possible by the OBR assuming that government departments would underspend their budgets by £7.5bn, in addition to banking the proceeds of the 4G mobile phone spectrum auction that has not yet taken place. | |
| It suggested that if the OBR would not assume departmental overspends in the future, "then it possibly shouldn't be banking future possible underspends now". | It suggested that if the OBR would not assume departmental overspends in the future, "then it possibly shouldn't be banking future possible underspends now". |
| The OBR is led by Robert Chote, who used to be director of the IFS. | The OBR is led by Robert Chote, who used to be director of the IFS. |
| Richest 'hard hit' | Richest 'hard hit' |
| Mr Johnson concluded that: "Working age individuals receiving benefits and tax credits have been hit. | Mr Johnson concluded that: "Working age individuals receiving benefits and tax credits have been hit. |
| "The richest few percent have been hit very hard. Pensioners, and those in work on more modest incomes have borne less of the burden." | "The richest few percent have been hit very hard. Pensioners, and those in work on more modest incomes have borne less of the burden." |
| The increased tax burden on the rich came from two channels. | The increased tax burden on the rich came from two channels. |
| Firstly, the government reduced the amount that individuals can contribute tax free to their pension funds each year. The IFS criticised the policy change, claiming that frequent changes in pensions rules were making it increasingly difficult to plan for retirement. | Firstly, the government reduced the amount that individuals can contribute tax free to their pension funds each year. The IFS criticised the policy change, claiming that frequent changes in pensions rules were making it increasingly difficult to plan for retirement. |
| Secondly - and less obviously according to the IFS - the chancellor reduced the income level, after adjusting for inflation, above which people must start paying the higher 40% rate of income tax. | Secondly - and less obviously according to the IFS - the chancellor reduced the income level, after adjusting for inflation, above which people must start paying the higher 40% rate of income tax. |
| This policy would mean that by 2015 there would be five million people paying the higher rate, one million more than now and double the number at the end of the 1990s. | This policy would mean that by 2015 there would be five million people paying the higher rate, one million more than now and double the number at the end of the 1990s. |