Kwasi Kwarteng must roll back his tax cut plans or impose a “wild” £60billion austerity blow on public services, pundits and rebellious Tories have warned.
Britain is set for a recession by 2024, forcing the chancellor to abandon his mini-budget giveaways or make a “painful” 15 percent cut in the public sector to get debt under control, the Institute of Fiscal Studies has found Celebration.
But any move to cut public services will face fierce opposition from some Conservative MPs when Parliament reconvenes and pressures Liz Truss after a chaotic party conference and turbulence in UK bond markets.
A Sunak-supporting former minister narrated pleasemynews: “There’s no way Tory MPs will endure brutal austerity measures in a post-Covid cost-of-living crisis. Liz has hit a dead end.”
Another former minister who supported Sunak in the leadership contest told pleasemynews that the chancellor “will have real difficulties getting spending cuts through Parliament.”
“I will not vote for her and neither will many of my colleagues,” they added.
The ex-minister said Mr Kwarteng had failed to prepare the ground for last month’s tax cuts or the likely follow-on austerity measures, which he warned would further alienate terrified voters from the Tories. An obsession with ideological purity had preceded political planning.
“Until the September 23 mini-budget, no one had considered the need for spending cuts,” the ex-minister said. “During the leadership campaign over the summer, they never discussed spending cuts. It feels like they took the lead with a false prospectus.”
“Kwarteng has damaged his political credibility by intervening so clumsily,” added the ex-minister. “It would be better for him to reverse the tax cuts now than cut public services, but it may not be enough to restore his reputation.”
The IFS report concludes that the looming “protracted” recession means the chancellor cannot continue with planned tax cuts without being forced into “large and painful spending cuts”.
“The Chancellor should not rely on overly optimistic growth forecasts or promises of unspecified spending cuts,” said Paul Johnson, director of the IFS. “To do so would risk his plans lacking the credibility that recent events have shown to be so important.”
Even if the government were to risk a fight within its own party and save £13bn over the next two years by raising benefits in line with wage growth rather than inflation, it would not be enough to fill the gap in public finances, the IFS found to close.
Mr. Kwarteng would still have to cut 15 percent of all public spending areas, not just health and defense, it said.
Shadow Chancellor Rachel Reeves MP said: “Labour has forced this Tory government to turn around during the cost of living crisis and we will do everything in our power to do so again to get them to roll back this catastrophic kamikaze budget make. ”
The IFS analysis follows the Treasury Department’s announcement that it is bringing forward details on Mr Kwarteng’s economic plans and independent forecasts from the Office for Budget Responsibility (OBR) by almost a month to October 31.
This means the details will be released ahead of the Bank of England’s next interest rate decision, which is due on November 3rd.
This also happened as the bank stepped up its intervention to calm the UK government bond market as borrowing costs continued to rise.
Members of the bank’s rate-setting committee have increased the pressure on Mr Kwarteng in recent days with public statements underscoring their reliance on clear OBR forecasts for policy-making.
If the government demonstrates fiscal discipline by cutting spending rather than reversing tax cuts, it risks another clash with the unions amid rising strikes.
TUC General Secretary Frances O’Grady said: “The Prime Minister promised in her leadership campaign that there would be no return to austerity.
“But since she took office, she’s made the wrong decisions. Instead of protecting our benefits, it blows billions in tax cuts for high earners and corporations.”
She added: “Responsible government would make it a top priority to rebuild our services after damage from austerity measures and the pandemic. Strong services like schools and hospitals not only make life better, they help create economic growth that everyone can share in.”