CHANCELLOR Osborne delivered a massive onslaught on public services and public sector pay in his budget yesterday, imposing billions more in cuts as well as a virtual pay cut on millions of workers, as inflation roars ahead.
Osborne estimated that growth in 2013 would be just 0.6% – half the 1.2% prediction he made in his Autumn Statement just four months ago.
He revised his forecast for the UK’s national debt to rise to 85% of GDP and not start coming down until 2017/18 – a year later than he previously predicted.
He announced £2.5bn of spending on ‘infrastructure’, which would be paid for by massive further cuts in public spending, details of which are to be announced in June when the government unveils its spending review.
He declared that most government departments are to have their budgets cut by 1% in each of the next two years with £11.5bn in further cuts.
Osborne opened with a shudder, warning that the the situation in Cyprus is ‘very worrying’, the eurozone is ‘fragile’ and another bout of economic storms would ‘hit Britain’s economic fortunes very hard’.
He said: ‘Today, I’m going to level with people about the difficult economic circumstances we still face and the hard decisions required to deal with them . . .
‘Our nation is in a global race competing alongside new centres of enterprise around the world for investment and jobs that can move anywhere . . .
‘Since the Autumn Statement the OBR (Office for Budget Responsibility) has revised down again its forecast for global economic growth, has sharply revised down its forecast for world trade.
‘Growth in the US and Japan was flat in the last quarter, while the eurozone shrank by 0.6 per cent, the largest fall since the height of the financial crisis.
‘The problems in Cyprus this week are further evidence that the crisis is not over and the situation remains very worrying.
‘I can confirm, as the prime minister said, the people sent to Cyprus to serve our country in our military or government will be protected in full from any tax on their deposits.
‘And the OBR have today sharply revised down their future growth forecast for the eurozone and expect it will remain in recession throughout this year.
‘In their words the underlying situation in the eurozone remains very fragile.
‘And I will be straight with the country – another bout of economic storms in the eurozone would hit Britain’s economic fortunes hard.
‘Forty per cent of all we export we export to the eurozone . . .
‘We are still very exposed to what happens on the continent.’
Moving on, Osborne predicted economic growth to be 1.8% in 2014; 2.3% in 2015; 2.7% in 2016 and 2.8% in 2017, he claimed that borrowing of £114bn this year will fall to £108bn, £97bn and £87bn in following years.
He claimed that borrowing as a share of GDP will fall from 7.4% in 2013-14 to 5% in 2015-16, but debt as a share of GDP will increase from 75.9% in 2012-13 to 85.1% in 2015-16.
He stated: ‘The spending reductions we promised have been more than delivered. Welfare reforms have been legislated for and are taking place. And here’s the clear sign of progress.
‘The proportion of national income spent by the state has fallen from 47.4% three years ago to 43.6% today and it’s on course to reach 40.5% at the end of the period.’
Osborne then announced his draconian plunder of public sector pay.
He said: ‘The government will extend the restraint on public sector pay for a further year by limiting increases to an average of up to 1% in 2015/16.’ This is much lower than inflation.
He added: ‘This will apply to the civil service and workforces with pay review bodies.
‘Local government and devolved administration budgets will be adjusted accordingly in the spending round.
‘We will also seek substantial savings from what is called progression pay.
‘These are the annual increases in the pay of some parts of the public sector. I think they are difficult to justify when others in the public sector and millions more in the private sector have seen pay frozen or even cut.
‘I know that is tough, but it is fair. And in difficult times with the inevitable trade off between paying people more and saving jobs we should put jobs first . . .
‘We will exempt our military from changes in progression pay.’
Osborne announced that Corporation Tax for big business is to be cut by 1% to 20% in 2015, boasting that it is ‘the lowest in the world’.