Budget 2016: 'Last chance' for George Osborne, IFS chief says

Osborne is struggling to meet his target of cutting the deficit

Trapped: George Osborne will deliver his fourth Budget in 12 months tomorrow (Getty)

George Osborne has had his last chance at delivering a budget surplus by the end of this parliament without imposing huge tax rises or spending cuts.

That’s the view of Paul Johnson, the director of the Institute for Fiscal Studies. The IFS gives its much anticipated response to the Budget on Thursday, which is now widely regarded as the ultimate authority on the Chancellor’s spending plans.

In a preview of the analysis to come, Johnson told the Today programme that “genuinely big” tax rises or spending cuts would be needed to cut the deficit by 2020 if there was any further downgrade in the public finances.

Osborne is struggling to meet his target of cutting the deficit - or the difference between what the Government earns in taxes and the amount that it spends - because of lower income tax receipts from weaker earnings. Resolution Foundation analysis shows that wages are not set to return to their pre-crisis peak before the end of parliament, in 2020/21.

Osborne has about a 50/50 chance cutting the deficit by 2020

(Resolution Foundation)

Johnson said there was only a 50/50 chance that Osborne would reach his target, echoing analysis from the Resolution Foundation.

"If things change again, if the OBR [Office for Budget Responsibility] downgrades its forecasts again, I don't think he will be able to get away with anything like this. I think he will be forced to put some proper tax increases in or possibly find some yet further proper spending cuts,” Johnson said.

"I think this is going to be the last chance he gets to move things around like this without doing anything genuinely big to the public finances,” Johnson added.

Andrew Sentance, senior economic adviser at PWC, earlier told the BBC that the OBR had downgraded its forecasts for UK economic growth because of the financial crisis.

“In my view this is realistic. We’re in a new normal for economic growth after the crisis. But it does mean the UK economy won’t grow as fast as Osborne was expecting in his Autumn Statement,” Sentance said.