Osborne set to use fiscal magic trick to deliver a budget surplus

Martin Beck, senior economic adviser to the EY Item Club, said the chancellor’s plan to find another £4 billion of departmental savings in the budget should be taken with a pinch of salt.

The savings will help the chancellor to meet his budget rule of eliminating the deficit by the 2019-20 financial year. However, they are expected to be uncosted, a trick he has used before to make his numbers work without detailing where the axe will fall.

By delaying the detail on the cuts, Mr Osborne can wait and hope that better growth in future years will allow him to row back on the extra austerity.

The chancellor used the tactic in the spending review last November, when he pocketed part of a £27 billion windfall to relax departmental spending cuts by £8 billion in 2019-20.

Government departments were given a total spending figure of £320.3 billion in the July budget for 2019-20, the key year.

At the spending review in November, the chancellor increased that by £8.3 billion to £328.6 billion to spare departments such deep cuts. The chancellor was able to relax the squeeze on departmental spending thanks to forecasting changes by the Office for Budget Responsibility, which handed him a £27 billion windfall for the five-year parliament. Unlike earlier windfalls, he used the money to ease up on austerity.

Mr Beck, said: “The tighter spending plans that the chancellor announced he would follow [early this year] mean that he has some blueprints for a squeeze on spending in his forthcoming statement.

“But the major extent to which those plans changed over a relatively short period of time suggests that we should take talk of spending cuts several years in the future with a pinch of salt. They may be more about getting Mr Osborne out of what he will hope is a short-term fiscal hole.”

Osborne has been criticised for using uncosted savings to meet his rules before. Two years ago, the Institute for Fiscal Studies criticised him for paying for tax giveaways with “unspecified spending cuts”.

The chancellor disclosed that extra cuts were coming on Sunday, when he told BBC One’s The Andrew Marr Show: “I need to find additional savings equivalent to 50p in every £100 the government spends by the end of the decade.”

Spending in 2019-20 is forecast to be £821 billion, which suggests the chancellor is eyeing £4 billion of savings.

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