Britain is stunned as chancellor predicts pain for years to come
BRITAIN will suffer six more years of economic pain, including falling living standards, rising unemployment and an unprecedented series of public spending cuts, its chancellor George Osborne warned yesterday.
Households will experience effective pay cuts until 2014, with higher-rate taxpayers losing 5pc of their income due to the impact of the government's austerity measures, official forecasts showed.
This year will see the worst squeeze on living standards since World War Two and the global turmoil caused by the crisis in the euro means conditions could get even worse, the British chancellor said.
In his annual autumn statement, Mr Osborne (pictured) admitted that the government would have to borrow £111bn (€130bn) more than expected due to the lack of growth in the economy. Unemployment will peak at 2.8 million next year.
The Office of Budget Responsibility (OBR), the government's independent financial watchdog, sharply reduced its forecasts for economic growth over the next few years.
As a result, Mr Osborne was forced to water down his previous assertions that government debt would be tackled by the time of the next election.
Instead, he announced plans to continue cutting public spending until 2017 -- by another £15bn more than forecast -- and he will have to campaign for the 2015 general election against the background of another austerity agenda.
Last night, the Institute of Fiscal Studies, the respected think tank, said: "Until now we had been thinking of four years of cuts as unprecedented in modern times. Six years looks even more extraordinary."
The prospects for significant tax cuts during this decade, including the imminent scrapping of the 50p top rate of income tax, are now remote.
According to the OBR, Britons cannot expect pay rises above inflation until 2014. The only group immune from the squeeze will be benefit claimants after Mr Osborne bowed to Lib-Dem pressure and agreed a 5.2pc, inflation-linked, rise from next April.
The biggest losers will be the wealthiest fifth of Britons. A Treasury analysis found this group -- who earn £40,000 a year and above -- will lose the equivalent of 5pc of their income by 2014-15.
In an attempt to balance the books, the chancellor announced that public-sector workers would also not see above-inflation pay rises until at least 2015. They will receive an average rise of just 1pc annually after the current pay freezes expire in 2012 or 2013.
The money saved will be diverted into an infrastructure programme to build new roads and railways in a bid to kick-start economic growth.
However, Mr Osborne admitted that he could not offer "quick fixes" and said such promises were akin to a "quack doctor offering miracle cures".
"People in this country understand the problems Britain faces," the chancellor said.
"They can watch the news any night of the week and see for themselves the crisis in the eurozone and the scale of the debt burden we carry.
"People know that promises of quick fixes and more spending this country can't afford, at times like this, are like the promises of a quack doctor selling a miracle cure.
"What we offer is a government that has a plan to deal with our nation's debts to keep rates low; a government determined to support businesses and support jobs; a government committed to take Britain safely through the storm.
"Leadership for tough times -- that's what we offer," added Mr Osborne. (©Daily Telegraph, London)