Osborne faces doubling austerity cuts to £48bn a year to hit targets
George Osborne will be forced to swing his axe much deeper into the budgets of services such as the army, police and courts as the annual savings the chancellor must find to meet his austerity targets are set to nearly double to £48bn, according to an analysis by the Financial Times.
As Britain hits the midway mark of its decade of planned austerity, the findings suggest that far from the cuts becoming lighter after 2015 - as Mr Osborne and prime minister David Cameron have suggested - they will be much harsher outside protected areas of health, schools and overseas aid.
The findings will come as a blow to the Conservative party which, only six months away from a general election, is trying to attract voters with talk of further tax reductions. Many experts, including the International Monetary Fund, say taxes will have to rise in the next parliament or more money will have to be borrowed to prevent a serious hit on many public services.
Mr Cameron wrote last month that most of the cuts in the austerity programme had been achieved, with only £25bn a year still to be removed from budgets, but FT analysis has found that less than half the required reduction has been made.
The analysis is based on the Office for Budget Responsibility's Budget figures from March, which outline government spending plans until 2018-19. If the next government continues to ringfence health, schools and overseas aid, the non-protected departments face real cuts of 33 per cent, against the 21 per cent cuts they faced between 2009-10 and 2014-15.
The FT examined the plans for government departments' current expenditure after adjusting for expected inflation between 2014-15 and 2018-19 - the second half of this government's package of cuts to eliminate its borrowings.
The level of cuts is nearly twice the £25bn estimate because that figure does not include planned cuts for two years out of the nine - 2015-16 and 2018-19 and takes no account of the effect on departmental spending of rising numbers of pensioners and increases in pension payments. The Institute for Fiscal Studies last month criticised Mr Cameron for omitting the first and last year of the next parliament when calculating the size of the cuts to be made.
Even if Mr Osborne cuts welfare payments by a further £12bn a year, as he promised in January, this will not be enough to prevent deeper cuts during the next parliament. In the March Budget documents, data show that after taking account of inflation, the coalition cut annual day-to-day public expenditure by £25bn between 2009-10 and 2014-15. However, a further £48bn must be removed from the current £312bn spent in all departments to reach a target of £264bn by 2018-19.
So far, the public sector has coped better than expected. But with the easier cuts already achieved, it will be harder to protect services and keep the deficit falling.
The OBR and the Treasury have seen the FT's findings but both declined to comment.
Panic over the rise of the populists is spreading across Westminster, which is turning on itself in a round of recrimination bordering on self-loathing. With a general election less than six months away, British politics is about to enter a volatile and unpredictable phase.
Polls suggest voters regard the Westminster class as out of touch and incompetent, while the Tories are in the throes of another bout of eurosceptic self-harm.
(c) The Financial Times Limited 2014