Major cuts to public spending might not now be needed – at least not on the scale predicted a week ago, the Institute of Fiscal Studies has said.
IFS deputy director Carl Emmerson told Sky News that what we just heard was a “very big tax rising announcement”.
“A week ago it looked very difficult. We were talking about how would you do this [implement her economic policy, including the energy price guarantee] without any tax rises,” he said.
“And it looked like you’d have to make some incredibly difficult decisions around working age, welfare, capital spending, and around day-to-day spending on public services.
“Now, there may well still be a need to squeeze spending, given the chancellor’s tax announcement today… but it might be the kind of more credible, more deliverable end of the scale rather than what we were looking at just a few days earlier.”
Jeremy Hunt’s announcement that the energy price guarantee will be reviewed in April rather than remaining in place for two years is “incredibly welcome”, Mr Emmerson said.
When the government first announced the energy price guarantee, he was “sympathetic” to the idea that the policy might be needed for this winter, but “it always looked rather odd” that the country was committing to it for two years.
Mr Emmerson went on: “I’m very pleased to see that the government is now taking an approach saying, well, yes, this big scheme will be in place this winter. We can’t do better than that in the short run.
“But it’s now reopening the idea that we can design something that will be cheaper for the taxpayer, hopefully, targeted towards those who really need it, but also preserves incentives that people have to cut back on their energy use for the following winter.”
Source: Sky News