Spending cuts could be as deep as after 2009 crisis, warns think tank

The Resolution Foundation think tank warned spending cuts could be as deep as those after the 2009 financial crisis, and that middle-income families may be unable to pay energy bills next year after the support package U-turn.

This echoes the concerns of Welsh politicians, who have said the new Chancellor’s latest financial statement shows “the chaos at the heart of the UK Government,” and signal “a new era of austerity”.

Resolution Foundation Chief executive Torsten Bell said on BBC Radio 4’s Today programme there was a fiscal black hole of around £30 billion even after the Government scrapped nearly all of its mini-budget.

“These are big numbers. If we are talking of spending cuts between £30-40 billion then they’re not that far off the scale of the cuts announced by George Osborne back in 2010,” he said.

On the scaling down of energy support, Mr Bell said: “It’s a big deal, if he (Chancellor Jeremy Hunt) did scrap all of that he’s saving up to £40 billion, but it’s a big deal for households too because our bills are due to hit £4,000 in April.

“I think really £4,000 is so large that even middle-income households won’t be able to afford those bills next year.

“So, he’s done the easy bit, scrapping the existing scheme, what he’s got to do is some hard work about how he intends to provide support for lower and middle-income households next year.”

Abandoned plans

The new Chancellor announced that the two-year energy price freeze for all households will now run for just six months, with the Government launching a review on how to then support bills after this period.

The new Chancellor also said that he is abandoning plans to cut the basic rate of tax by 1p – which had been due to be brought forward to April – and that it would remain at 20p in the pound until the country can afford to reduce it.

The cut in dividend tax promised by his predecessor will also go, along with VAT-free shopping for overseas tourists, the freeze on alcohol duty and the easing of the IR35 rules for the self-employed.