Chancellor says wealthy will have to make larger contribution and admits cutting deficit is taking longer than planned
George Osborne has paved the way for a fresh raid on pensions in this week’s autumn statement, saying the rich will have to make another contribution to bringing down the deficit, but the chancellor has ruled out a mansion tax.
He said on the BBC’s Andrew Marr Show: “The richest need to bear their fair share – and they will.”
It appears he has been forced to compromise with Liberal Democrats on his plans to freeze welfare benefits, and will announce a below-inflation rate rise of around 1%.
Osborne refused to say explicitly that he would be unable to meet his target of ensuring debt as a proportion of GDP would be falling by the end of the parliament, saying it was taking longer than planned to bring the debt down.
He has already had to put back by two years the date by which he will meet his commitment to eradicate the structural deficit. The Office for Budget Responsibility is likely to say it will take another extra year, meaning it will have taken eight years overall to eradicate. But he said it would be a catastrophe to turn back now.
Liberal Democrats say they have seen off plans backed by the prime minister and by the work and pensions secretary, Iain Duncan Smith, to remove housing benefit for those aged under 25.
The bulk of the £10bn welfare savings are not due to be enforced until after the election, but Osborne wants a downpayment on the cuts now, partly because some reforms will require new laws in this parliament for implementation in the next.
Trying to show he would be balanced in distributing the pain, he said: “It’s got to be done fairly, and that means yes, the richest need to bear their fair share – and they will. That means more than they’re paying at the moment … but there is another conception of fairness, the fairness of the individual who goes out to work and lives next to someone who lives on benefit; we are also going to tackle welfare bills, and that is the Conservative approach to fairness.”
Osborne hinted strongly that he would have to revise his fiscal targets, saying the recovery had taken longer than “anyone would have hoped”.
“The big fiscal promise I made was that we would make sure that Britain pays its way in the world, that it was seen as a credible place to invest and we are seen as a credible place to invest. We had two targets – one was to get debt falling as a share of the national income by 2015-16, and also to balance the current budget. Now, there’s going to be an independent assessment of both those targets on Wednesday.
“It’s clearly taking longer to deal with Britain’s debts, it’s clearly taking longer to recover from the financial crisis than anyone would have hoped, but we’ve made real progress. The deficit is down by a quarter, there are 1m more jobs in the private sector, and to turn back now, to go back to the borrowing and the debt and the spending that Ed Balls represents, would be a complete disaster for our country.
“I think undermining the credibility of our deficit plan, going back on our commitment to deal with our debts would be a complete catastrophe for Britain and would put us into the place some European countries are in at the moment, and that is not a place Britain wants to be.”
Pressed on how he would cut the bill if Labour were in power, Balls, the shadow chancellor, told the programme he would “get people back to work. The welfare bill is up because inflation is up and long-term unemployment is up.”
He added: “[Osborne] is cutting taxes at the top and then he says …: ‘I’m going to hit people at the bottom.'”
Balls claimed the chancellor was “in a deep hole” and said: “I’m not going to dig our way to unfairness and economic failure, that is perverse.”
Osborne is likely to announce a modest amount of extra public spending, but underlined what he was already doing. “We’ve got to build more homes – that means changing the planning laws, and at the same time underwriting the purchase and the construction of homes – we’re doing that. We’ve got to find more infrastructure – roads and rail and the like – we’re doing more of that and again we’re using the government’s low interest rates to help construct those projects, to guarantee those projects”.
He said he would be announcing extra staffing for the Inland Revenue to investigate the tax behaviour of multinationals operating in Britain.
Labour’s former chancellor Alistair Darling accused Osborne of having a “bankruptcy of ideas” over how to generate growth. He told Sky News the chancellor was “wildly off all his targets” for cutting the record budget deficit, and urged new announcements in the autumn statement for major engineering projects.
“It strikes at his very credibility and the credibility of this government’s economic judgment,” said Darling.