Tax cuts paid for by reduction of public spending says expert

Paul Johnson, director of the Institute for Fiscal Studies, said the "substantial tax cuts" in Chancellor Jeremy Hunt's autumn statement are being "paid for by planned real cuts in public service spending".

In a post-statement briefing on Thursday, Mr Johnson said the Chancellor is "by the narrowest of tiny margins still on course to meet his - poorly designed - fiscal rule that debt as a fraction of national income should be falling in the last year of the forecast period".

He continued:

"That is on the basis of a series of questionable, if not plain implausible, assumptions.

"It assumes that many aspects of day-to-day public service spending will be cut. It assumes a substantial real cut in public investment spending.

"It assumes that rates of fuel duties will rise year on year with inflation - which they have not done in more than a decade and they surely will not do next April.

"It assumes that the constant roll-over of 'temporary' business rates cuts will stop. It assumes, of course, that the economy doesn't suffer any negative shocks."

OBR chairman Richard Hughes said that his fiscal watchdog was working with "four years of just four numbers" on the latter part of Government spending plans, following the autumn statement.

He told a Resolution Foundation event:

"There are political choices involved there. What we don't know is what those political choices are, because their spending framework doesn't require when to make them.

"In any other country in the world, if you look at their fiscal forecasts, they have got a detailed spending plan going out five years, telling you how much they are spending on health, education, transport.

"In our framework, these things kind of run out until the Government makes a political decision to run a spending review."

Office for Budget Responsibility chair Richard Hughes was asked why the fiscal watchdog was relaxed about the Chancellor's tax cuts in regards to inflation.

The Resolution Foundation said the tax cuts announced by Jeremy Hunt were the largest since 1988.

"In essence, because borrowing is unchanged," Mr Hughes told a post-autumn statement event by the think tank.

"Higher inflation is bringing in more tax revenue. And the Chancellor decided to give that back to taxpayers."

Asked if inflation could have come down quicker without the tax cuts, he declined to comment.

Chancellor Jeremy Hunt said:

"Yesterday, I did make a start in bringing down the tax burden. I've never said that we were going to get there all in one go."

People should not be parked on benefits for life, Chancellor Jeremy Hunt has said.

"If you have mental health difficulties, we think the default should be to treat those mental health issues, not to park you on benefits for the rest of your life without any help with getting into work."

Jeremy Hunt insisted he has not discussed the timing of the general election with Rishi Sunak, but did not rule out an early spring Budget.

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