UK facing ‘crippling’ cuts to public services as experts warn of fresh austerity
The UK faces "crippling" public spending cuts more severe than those brought in after the 2008 financial crash, economists and the trade unions have said.
Liz Truss's and Kwasi Kwarteng's mini-budget on Friday has wreaked havoc on the British economy, causing the pound to crash to record lows, triggering a warning from the International Monetary Fund, and forcing the Bank of England (BoE) to buy the UK's own debt to rescue pensions.
It came after the new announcements pledged huge, unfunded tax cuts - many of which were for the wealthiest people in the UK.
The government has now indicated another round of austerity is one the cards - ordering Whitehall officials to find "efficiency savings" and refusing to rule out real-terms cuts to benefits.
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According to reports in the i newspaper, the government is considering scrapping a commitment to increase benefits in line with inflation, which would result in real-terms cuts.
Treasury minister Chris Philp said departments will have to stick to existing spending levels despite spiralling inflation eating into budgets already.
Leading economist Torsten Bell has warned of worse austerity than that imposed by former Tory chancellor George Osborne in order to pay for the tax cuts in the mini budget.
"It looks... like we're heading for Osbornomics," said Bell, chief executive at the Resolution Foundation.
Bell warned the funding hole left by tax cuts is worth tens of billions and is likely to be paid for by measures like cutting benefits.
He added: "The scale of it is Osborne, or Osborne plus, if the OBR gives them a worrying low nominal GDP forecast."
Osborne made heavy public spending cuts to areas like welfare and social care following the Conservatives winning office in 2010 following the financial crisis, which experts say is linked to almost 60,000 deaths.
He later said: "If we seriously end up cutting benefits to fund tax cuts for the top in the most unequal large country in Europe then we've lost the plot."
The TUC warned that there was "nothing left to trim" in the field of public spending.
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“Government departments have been tasked with finding efficiency savings," said Frances O'Grady, TUC general secretary.
“After 12 years of cutting services to the bone, there is nothing left to trim.
“When the Conservatives say efficiency savings this is usually code for cuts.”
Anti-poverty think tank the Joseph Rowntree Foundation (JRF) called the Truss's tax cuts for the wealthiest "indefensible".
"It is morally indefensible that Liz Truss has given tax cuts to the richest in our society and yet has not committed to uprating benefits by inflation, as promised by Rishi Sunak," said the JRF on Twitter.
"If the uprating doesn't happen, this will be another devastating blow for people on low incomes who are already making heart-breaking decisions between heating their homes and feeding their families."
It comes amid warnings from Labour, the International Monetary Fund (IMF), and economists that the government's plans will widen inequality in the UK.
“We are closely monitoring recent economic developments in the UK and are engaged with the authorities," the IMF said on Tuesday.
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It added: "The nature of the UK measures will likely increase inequality."
Labour has described the announcement on Friday as a "kamikaze budget" and called for parliament to be recalled.
“If the prime minister continues to prioritise saving her face over saving people’s homes, Tory MPs must join Labour in calling for parliament to be recalled so this kamikaze budget can be reversed," said shadow chancellor Rachel Reeves.
“Failure to do so will make them complicit in this reckless bout of economic self-harm.”
Watch: 'We are going to help people': Kwasi Kwarteng remains confident in mini-Budget