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Osborne: Spending cuts needed now so we don't pay later

Published 13/03/2016

Chancellor George Osborne is seeking to close a tax loophole
Chancellor George Osborne is seeking to close a tax loophole

George Osborne has insisted "we need to act now so we don't pay later" as he paved the way for fresh spending cuts in the upcoming Budget.

Savings equivalent to 50p in every £100 the Government spends need to be found by 2020, the Chancellor said.

But the cuts are "not a huge amount in the scheme of things", Mr Osborne told BBC One's Andrew Marr Show.

"My message in this Budget is that the world is a more uncertain place than at any time since the financial crisis and we need to act now so we don't pay later," he said.

"That's why I need to find additional savings equivalent to 50p in every £100 the Government spends by the end of the decade because we have got to live within our means to stay secure and that's the way we make Britain fit for the future."

Asked about claims the Government is facing an £18 billion blackhole in its finances, he replied: "£18 billion is the sum of money that has been revised off our nominal GDP. In other words, that's a number out there last year because inflation was lower.

"It's a real number in the sense that all around the world every Western country, and indeed in big emerging countries like China, Brazil, Russia, people are looking at economic prospects and thinking they are not as rosy as they were just a few months ago."

Mr Osborne appeared to indicate the Government may hold back from fuel duty rises in Wednesday's Budget. The Chancellor has come under pressure from Tory backbenchers to resist hiking up the levy.

He said: "I'll set out the tax rates in the Budget. On fuel duty, we had a manifesto commitment there and we have pencilled in fuel duty plans going forward but what I would say is, every time we can have our economy more competitive, we do."

Around 640,000 people will be affected over the next five years by changes to Personal Independence Payments (PIP).

But Mr Osborne denied claims he was hitting the most vulnerable through cuts to the disability benefits payments.

"I don't accept that at all. We are increasing spending on disabled people," he said.

Mr Osborne defended the £130 million tax sweetheart deal Google reached with HMRC, which was criticised by MPs for being "disproportionately small''.

"I was faced with a situation when I became Chancellor where we were not raising any money from this company. We are raising money from Google and indeed, from Facebook and the like. I think that is a success."

Next week's Budget will include a clampdown on a tax loophole widely exploited to disguise employees as freelancers.

Civil servants, along with institutions like the BBC and the Bank of England, will be hit by rule changes to stop earners gaining tax advantages by being "off the books".

Around 20,000 public sector workers are avoiding an average of more than £3,500 a year in income tax and National Insurance Contributions under the current system, according to the Government.

Sources claimed that an estimated 90% of earners who should comply with the rules do not.

Under the Chancellor's clampdown, state-backed organisations, instead of the individual, will become responsible for deciding if income should be taxed at source.

New guidelines will also be introduced to make it clearer when employment taxes should be paid.

MPs criticised the BBC in 2012 after it emerged 3,000 people were paid through personal services companies, potentially allowing them to limit their tax liabilities.

The set-up was traditionally used by professional contractors doing short-term work for several firms but is now widely exploited.

Police, councils, the NHS, schools, Whitehall, Network Rail and Channel 4 will also be affected by the changes, which the Government says will ensure colleagues doing the same jobs will be paying the same amount of tax.

As Mr Osborne tried to put the finishing touches to his Budget, his concentration was disrupted by "noisy" filming outside the Treasury by the new Top Gear team

The Chancellor tweeted host Chris Evans pleading with him to "keep it down".

" Trying to write my Budget, despite noisy episode of BBC Top Gear being filmed outside on Horseguards Parade. Keep it down please Chris Evans," he wrote.

Labour called for the Chancellor to take action in the Budget to tackle homelessness.

It claimed that that, on current trends, the number of homeless families is set to reach nearly 400,000 by the end of the Parliament.

Labour housing spokesman John Healey said: "Rising homeless figures carry the starkest warning for the Chancellor ahead of the Budget.

"This spiralling scale of homelessness shames us all when Britain is one of the richest countries in the world. It is a test of our basic humanity. It should shake the Chancellor from his complacency about the growing homeless crisis and shock him into action."

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