Warning that 2014 will be ‘the year of hard truths’, George Osborne has said that he is extending the austerity programme and will be making cuts of £17bn this year to help tackle the deficit.
This will be followed by £20bn of cuts next year, and a further £25bn slashed in the following two years – more than £60bn in total. So anyone who thought the economic recovery meant recovery will be disappointed.
The welfare budget will be the main source of cuts. Housing benefits for under 25s will be targeted, as the Chancellor said it seemed unfair to hard-working 25-year-olds who could not afford their own homes were having to live with parents. He also said he would look at people on incomes of £60,000-£70,000 living in council homes, he told BBC Radio 4’s Today programme.
Osborne also suggested he supported keeping generous benefits such as winter fuel payments and free bus passes for pensioners, a key target group for the election as pensioners are more likely to vote.
In a speech in Birmingham this morning, the Chancellor warned that despite an improved economic outlook there is ‘still a long way to go’.
Osborne told voters that tax cuts can only be afforded if further significant reductions are made in the public spending the revenues paid for.
‘As a result of the painful cuts we've made, the deficit is down by a third and we're borrowing nearly £3,000 less for every one of you and for every family in the country,’ he will say.
‘That's the good news. The bad news is: there's still a long way to go.
‘We're borrowing around £100bn a year - and paying half that money a year in interest just to service our debts. We've got to make more cuts.
‘Do we say 'the worst is over, back we go to our bad habits of borrowing and spending and living beyond our means and let the next generation pay the bill’?
‘Or do we say to ourselves 'yes, because of our plan, things are getting better - but there is still a long way to go and there are big, underlying problems we have to fix in our economy'?’
George Osborne’s downbeat message comes as two business confidence surveys suggests firms are feeling more optimistic about their chances of expanding and creating more jobs this year. A Lloyds Bank survey of firms suggests business confidence is at a 20-year high, with orders, sales, and profits all forecast to rise.
Meanwhile a survey by Deloitte suggests 49% of CFOs think the policies of new Bank of England Governor Mark Carney have contributed to rising confidence. In Deloitte’s quarterly survey of 122 chief financial officers, which included 32 CFOs from FTSE 100 firms, 91% forecast revenues rising in 2014 with 88% saying they thought there would be an increase in the number of mergers and acquisitions.
Deloitte chief economist Ian Stewart said: ‘CFOs enter 2014 in buoyant mood with a focus on expansion, investment and hiring in the year ahead. This bodes well for the broad-based recovery policymakers hope to see in 2014.
‘Uncertainty and credit shortages, two major blocks on business activity, have eased substantially and CFOs believe that the level of financial and economic risk facing their businesses has reduced significantly in the last year.’