Newspaper article The Journal (Newcastle, England)

Savage Cuts Loom as Osborne Faces PS48bn Black Hole

Newspaper article The Journal (Newcastle, England)

Savage Cuts Loom as Osborne Faces PS48bn Black Hole

Article excerpt

Byline: ECONOMY Jamie Grierson

CHANCELLOR George Osborne will have to fill a PS48bn black hole in the public finances if he is to get his deficit-busting plans back on track, a report has warned.

Some Government departments face cuts between now and 2018 on a scale similar to those in the spending review of October 2010, according to the Social Market Foundation (SMF) and the Royal Society of Arts (RSA).

The SMF and RSA said the "small print" of the March budget implied that PS26bn of new cuts would be required beyond the 2010 spending review. But the report estimates that, due to the deteriorating economic situation, a further PS22bn of cuts will need to be found by 2018.

Ian Mulheirn, director of the SMF and author of the economic analysis, said: "According to the OBR's (Office for Budget Responsibility) own models, the economy appears to have less room to bounce back than previously thought.

"Combined with high public borrowing since March this implies a much bigger black hole in the public finances, making the stakes for the next spending review higher than ever." The report comes after the Treasury announced on Friday that it is to receive a PS35bn boost as part of a deal with the Bank of England that will effectively reduce public debt.

The 2010 spending review was supposed to finish the job of deficit reduction by 2014, but the next one in December looks set to lay out "much more pain", the report said.

The Government will need to find additional savings of 23% from departmental spending, compared with an average of 19% following the 2010 review. Mr Mulheirn added: "Combined with the savings pencilled in at the last Budget, the developments since March mean that the Chancellor will have to lay out some eye-watering cuts at the next spending review and will prolong austerity deep into the next parliament. …

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