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Chancellor George Osborne's spending cuts may be extended

By Sam Masters

Published 26/11/2012

Chancellor George Osborne
Chancellor George Osborne

George Osborne's squeeze on public spending could last three years longer than originally planned with tax rises or additional cuts required to reach his “fiscal mandate”, a respected economic think-tank has warned.

Today's “relatively pessimistic” projection from the Institute of Fiscal Studies (IFS) ahead of the Chancellor's Autumn Statement on the economy next week, revealed that Mr Osborne could be forced to extend his public spending reductions into 2018.

The IFS said that the Treasury could need to identify a further £11bn from cuts or tax rises on top of the further £8bn reduction in welfare spending already planned.

Mr Osborne has already had to signal further real-terms cuts of 2.3% in Whitehall spending up to 2016/17 and the slashing of the benefits bill by another £8bn.

The IFS scenario is based on a prediction that the recent deterioration in UK growth prospects and tax receipts continues. Then, the Chancellor would be forced to announce significant further cuts to reach his “fiscal mandate”.

Labour seized upon the IFS report as proof that Mr Osborne was “choking-off” the economic recovery.

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