THE LABOUR Party tried to “fiddle the books” in its final economic predictions, the British chancellor of the exchequer has said, following an independent experts’ report that warned that tough spending cuts and tax rises will have to be imposed in coming years.
In one of his first acts in office after entering the treasury, George Osborne set up the Office of Budget Responsibility under economist Sir Alan Budd and gave it powers over official financial forecasting in future.
Economic growth will be 2.6 per cent in 2011, significantly lower than the 3.5 per cent forecast by former chancellor Alistair Darling, but national borrowing is expected to be £32 billion lower than the Labour chancellor had expected in March, the new body said yesterday in its first report.
The Conservative-Liberal Democrat alliance spent much of last night in a war of words with Labour over the report, although it does offer Labour some ammunition to defend its stewardship of the British economy during its years in power.
The improvements in the deficit figures this year had been “driven by” Mr Darling’s actions, it said, while household spending was supported by “tax changes such as his temporary cut in VAT”. It cautions against hopes that private sector spending will fill the gap that will be left by public spending cuts.
Accusing Labour of leaving “an even bigger mess” than he had suspected, Mr Osborne said the Office of Budget Responsibility’s findings supported his determination to tighten spending in next Tuesday’s budget, while Lib Dem leader and deputy prime minister Nick Clegg said Labour had left “a terrible legacy” that left major spending cuts as “the only option” for the new government.
The new government has yet to lay down its borrowing targets, though Mr Osborne has previously made it clear that 80 per cent of the money needed to restore the treasury’s figures should come from spending cuts and just 20 per cent from tax rises.
Given the tax rises already announced by Labour before it left power, Mr Osborne could hold to most of this reform plan and get away without significant increases in taxes taxes next week if he can find £68 billion worth of cuts every year to 2014-15.