TAX credit cuts could cost Britain’s economy £3.5 billion a year, £257 million in Scotland, public service union Unison claims today as experts dealt George Osborne a blow ahead of his Autumn Statement by warning weaker-than-predicted growth would blow a £30bn black hole in the UK’s finances by 2020.
As First Minister Nicola Sturgeon and Labour’s John McDonnell urged the Chancellor to abandon his planned £4.4bn reduction in tax credits, warning they would hit the country’s most vulnerable, Unison predicted almost three million working families with children could lose an average £1,300 a year; totalling £3.5bn.
Noting how the House of Lords last month forced Mr Osborne to think again, Dave Prentis, Unison’s General Secretary, warned the threat remained.
“Even if the Chancellor announces a pause to their introduction today, it will only be delaying untold financial misery for working families,” he declared.
"Tax credits are not a luxury but are quite simply a lifeline for hardworking families. Taking away a large proportion of the tax credits they rely upon will turn their already precarious finances upside down."
While the Chancellor said he would "lessen the impact on families during the transition," he is still committed to cutting welfare by £12bn as part of his bid to balance the books by the time of the next General Election.
But the Centre for Economics and Business Research(Cebr) said not only would Mr Osborne narrowly miss this year's deficit target of £69.5bn but there would be no surplus in five years’ time.
Weaker-than-predicted growth would, it argued, mean the UK stayed in the red by £21bn in 2020, instead of the Office for Budget Responsibility's forecast in July for a £10bn.
And Cebr said the deficit would remain at £18.4bn in 2021, rather than the £11.6bn surplus predicted in July; which would effectively leave the Chancellor with a £30bn gap in the Treasury finances.
"Because the Chancellor's forecasts rely on an implausibly high rate of growth, the Government's fiscal position is much less favourable than was set out in the July Budget. The deficit will not be eliminated in the current Parliament," it argued.
Ms Sturgeon used a major speech in Glasgow to urge the Chancellor to reverse “potentially catastrophic” changes to tax credits that would impact on around 200,000 Scottish families with children.
She said if he did not, then “the Scottish Government will set out proposals to protect the incomes of low-paid families in our Budget in December”.
Ian Murray, the Shadow Scottish Secretary, claimed Mr Osborne’s economic plans were now in “utter chaos”, having failed to balance the books and having based an economic recovery on poorly paid jobs and zero-hours contracts.
The Edinburgh MP made clear that if the UK Government did not reverse its planned tax credit cuts, then Scottish Labour would use the new welfare powers devolved to Holyrood to “restore the money lost in full”.
Alongside the Autumn Statement, Mr Osborne will deliver the five-year spending review.
With budgets for the NHS, defence, schools and international aid protected, others for those covering Iain Duncan Smith's Work and Pensions Department as well as the Home Office, Foreign Office and Department for Business look set to bear the brunt.
Savings of up to 40 per cent have been targeted towards meeting the £20bn of spending cuts pencilled in by 2020.
A £10bn increase in the NHS budget by then will mean, under the Barnett Formula, the Scottish Government will get a financial boost. But this will have to be offset with the deep departmental cuts elsewhere, which will mean any consequential financial spin-off for Scotland will be reduced.
While David Cameron has promised multi-billion increases for the military, special forces and counter-terrorism, fears have been raised that the Prime Minister's planned cuts to policing south of the border will undermine forces’ ability to tackle terrorism, most notably in London.
Mark Rowley, the UK’s top counter-terrorism officer, said Scotland Yard’s counter-terrorism capability would be hampered if there were budget cuts of more than 10 per cent as feared; slashing budgets by 20 per cent would pass a "tipping point," he warned.
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