Osborne warned on public finances

Chancellor George Osborne is “running out of wriggle room” to get the UK back in the black by 2020, the Institute for Fiscal Studies has warned.

Mr Osborne has just a 50% chance of hitting his target of a £10bn surplus on the public finances by 2020, according to the think tank.

On Wednesday Mr Osborne was forced to revise down his growth forecasts.

He blamed global factors, but Labour said his credibility was “completely shot”.

Labour also accused him of cutting taxes for the wealthy at the expense of the poor.

Mr Osborne insisted on BBC Radio 4’s Today programme that he was still on course to clear the deficit.

But he added the proviso that it would happen “in normal times when the economy is growing”.

However, the IFS said if growth deteriorated further then Mr Osborne would need fresh spending cuts or tax rises to meet his pledge.

“If there was another downgrade in fiscal forecasts of a similar magnitude and the chancellor did wish to remain on course to deliver a budget surplus in 2019-20 then this would surely require more real policy change,” said IFS director Paul Johnson.

He also warned that there would be an additional “year of austerity” after the next election as a result of Mr Osborne’s pledge to maintain the surplus.

“The chancellor has added another year of austerity, another year of spending cuts to the end of his plans so even if we get – if we get – to surplus in 2019/20 which is the plan, we’ll have to have another year of pain to stay there the following year,” Mr Johnson told the BBC’s World at One.

The think tank calculated the public finances would be £56bn worse off as a result of the growth downgrade from the Office for Budget Responsibility and said “changes in assumptions about future productivity growth” were largely to blame.

“If the OBR is right about that we should all be worried. This will lead to lower wages and living standards, not just lower tax revenues for the Treasury,” it said.

BBC experts analyse the Budget

Political editor Laura Kuenssberg: Can Osborne defy political history?

Economics editor Kamal Ahmed: Osborne stakes reputation on 2020 surplus

Business editor Simon Jack: Small businesses are the winners

Political correspondent Iain Watson: Corbyn gets mixed reviews

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