George Osborne: We don't need to raise taxes to beat deficit

Chancellor says he suspects Labour would plan "big tax increases" if they regain power in 2015

The Government's economic plans can be achieved without further tax rises following the general election, Chancellor George Osborne said today.

In comments which foreshadow one of the main political battlegrounds on which the election is likely to be fought, the Chancellor added that he suspected Labour of planning “big tax increases” if they regain power in the 2015 poll.

Respected economic think tank the Institute for Fiscal Studies (IFS) last month warned that Mr Osborne would have to raise taxes by £6 billion after the election if he was to keep to his existing rule of financing 80 per cent of the Government's deficit reduction programme from cuts and 20 per cent from tax hikes.

But Mr Osborne told the House of Commons Treasury Committee that the 80/20 split, announced when the coalition came to power in 2010, was only ever a “guide” rather than a firm commitment.

Decisions in this year's Budget and Spending Review mean that that ratio is likely to be around 85/15 in the years after the election, according to the IFS analysis.

Mr Osborne said that, while the coalition had agreed a path towards reducing the deficit, the Conservative and Liberal Democrat sides of the Government have not signed up to a collective position on the exact mix of cuts and tax rises beyond 2015/16.

He told the Committee: “The further consolidation after 2015/16 is built into the tables as a spending reduction.

“I am clear that tax increases are not required to achieve this. It can be achieved with spending reductions.”

Mr Osborne said he was not sure what Labour's tax and spend policies would be at the election, following Ed Miliband's recent announcement that he would stick to the coalition's plans for 2015/16.

“I'm not sure whether they would do big tax increases,” the Chancellor told the Committee. “I suspect they would, but that is for them to explain.”

Mr Osborne said last month's spending review set out precise plans for 2015/16, but made clear that "further consolidation" would be needed in 2016/17 and 2017/18 as the Government continues its drive to eliminate the UK's national deficit.

Any parties which commit themselves to a similar path of deficit reduction will have to set out how they would manage it, he said.

And he added: "I think it can be achieved by spending consolidation."

Following Mr Miliband's decision to stick to the 2015/16 plans, the Chancellor suggested that "opposition to what I am doing in the economy is crumbling".

Mr Osborne declined to set a target for public spending as a proportion of GDP, which currently stands at 44.4 per cent and is due to fall to 40.5 per cent by 2017.

But he said that any country which allowed the level to rise "sharply" above 40% had historically got itself into trouble, and described the level of almost 48 per cent which he inherited from Labour as "totally unsustainable".

Asked whether he saw any scope for tax cuts following the election, Mr Osborne described himself as a "low-tax Conservative", but said that any reductions must be "sustainable".

Mr Osborne defended the protection given to spending on the NHS, schools, overseas aid and the state pension in the spending review, which has forced other departments to bear the brunt of the squeeze.

He confirmed that Business Secretary Vince Cable and Defence Secretary Philip Hammond had attempted to ease the burden of cuts on their departments by transferring responsibility for medical research and training and Army medicine into the health budget.

But he said he rejected this proposal.

And he defended the "ringfence" around protected spending areas as "a political expression of what the Government wishes to achieve and the support it wants to give to society".

He said he was "proud" of the commitment to keep aid spending at 0.7 per cent of GDP, and did not believe that it had a significant impact on the money available to other departments.

And he said it was "not unreasonable" to increase spending on the NHS in real terms at a time when the population was ageing.

The Government intends to "live by its commitment" to pensioners to protect the value of their state pension with a "triple lock", said the Chancellor.

But he made clear that the state pension age could rise beyond 67 in the future, as a result of a mechanism built into the Pensions Bill introducing regular reviews of the impact of increasing life expectancy.

Mr Osborne insisted his Help to Buy scheme providing state subsidies for mortgages, announced in the Budget in March, was fuelling a new housing price bubble.

He stressed that it was a temporary, time-limited programme that would end after three years.

"The purpose of this is to repair an impaired mortgage market that is clearly not functioning properly," he said. "I don't think the situation at the moment looks like an asset price bubble."


Club legend Paul Scholes is scared United could disappear into 'the wilderness'
A model of a Neanderthal man on display at the National Museum of Prehistory in Dordogne, France
Dawkins: 'There’s a very interesting reason why a prince could not turn into a frog – it's statistically too improbable'
newsThat's Richard Dawkins on babies with Down Syndrome
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
Have you tried new the Independent Digital Edition apps?
ebooksAn evocation of the conflict through the eyes of those who lived through it
Dinosaurs Unleashed at the Eden Project
Arts and Entertainment
Life and Style
This month marks the 20th anniversary of the first online sale
techDespite a host of other online auction sites and fierce competition from Amazon, eBay is still the most popular e-commerce site in the UK
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

HR Advisor - East Anglia - Field-based

£35000 per annum: Ashdown Group: To be considered for this position you will n...

Quantitative Analyst (Financial Services, Graduate, SQL, VBA)

£45000 per annum: Harrington Starr: Quantitative Analyst (Financial Services, ...

Application Support Engineer (C++, .NET, VB, Perl, Bash, SQL)

Negotiable: Harrington Starr: Application Support Engineer (C++, .NET, VB, Per...

C# .NET Software Developer (Client-Side, SQL, VB6, WinForms)

Negotiable: Harrington Starr: C# .NET Software Developer (Client-Side, SQL, VB...

Day In a Page

Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home