Already under fire for not lashing down his Help to Buy mortgage guarantee scheme, George Osborne is now taking heavy shelling from the Institute for Fiscal Studies (IFS).

The IFS predicts up to £9bn of tax rises may hit the public, equivalent to a 2p rise at basic rate. It's either that or borrow more, says the IFS.


Grim outlook

"The picture for future years has deteriorated significantly," says IFS director Paul Johnson. "Just as tax receipts have under-performed in the last few months forecasts for receipts have been downgraded each year through to 2017-18."

The scrapping of the fuel duty escalator rise will cost the country around £5bn and the increase in the personal tax allowance also much pressure, Johnson says. Any tax hikes would likely take place from an incoming government in 2015, which would likely struggle to cope with a widening public finance gap. So more cuts - or tax hikes.

"At least 50% spending cuts"

Another voice has added to the worry. "You wouldn't know it from the headline figures, but local government, along with some other unprotected and unloved public services, looks likely to face at least 50% spending cuts between 2011-12 and 2017-2018,"said Tony Travers, a research director at the LSE in an interview with Public Finance Magazine.

Johnson goes on to add that Osborne's budget looks "odd" in terms of clamping down on spending. The Chancellor's handiwork, says the IFS director, is driven by increased National Insurance revenues from public sector employers; the effect of public spending cuts pencilled in for the next parliament, he adds, will be more severe than expected.

Messing with the numbers

"Add to that the fact that we are promised more capital spending, more spending on social care, and a more generous childcare subsidy, within an overall spending envelope that has not been expanded and the outlook for all other unprotected spending looks grim indeed."

To add insult to injury, the IFS also poured scorn on the Chancellor for putting pressure on civil servants to manipulate borrowing figures - delaying payments to the World Bank, for example - for political advantage. There's also concern that the poor state of the public finances could see a further credit rating downgrade.

  • Public Sector workers - losers

    There was bad news for public sector workers, who will see pay increases limited to 1% in 2015/2016. The government will also revisit 'progressive pay' which sees pay increase automatically each year which he said was 'difficult to justify' given that private sector pay has been frozen or cut. The armed forces, however, will be exempt from this.

  • Families -“ winners

    Feeling the pressure on help working families, the Chancellor made a welcome announcement that working parents will receive a contribution from the Government towards the cost of childcare. Working parents will receive 20% - equivalent to the basic rate of tax - of their yearly childcare costs, up to a total of £6,000 per child. He said the move will save a typical working family with two children under 12 up to £2,400 a year.

    Also, leaked this morning was the news that the Chancellor will raise the income tax threshold to £10,000 from April 2014 – a move he said will give 2.4million people at tax cut of over £200 each a year, as well as lifting two million people out of income tax altogether.
    Yet while both moves are widely welcomed, they do little to counter the austere measures of previous Budgets, explains Clare Francis, editor-in-chief at MoneySupermarket.com:"Giving with one hand may be a positive, but taking away with the other through other tax increases and benefit cuts means that people are no better off. "In fact, the cumulative effect of this and previous budget changes, combined with wage stagnation and rising living costs means millions are worse off and an increasing number of families are on the breadline, struggling to make ends meet every month."