A return to austerity is predicted in Britain after the reversal of the economic policy of Tras

London, Thanasis Gavos

Estimates of new period of austerity at Britainalmost identical in depth to that imposed by the Cameron government in the wake of the 2008-09 financial crisis, analysts say after the government’s economic plan was completely upended Tras.

With most of the tax cuts announced being scrapped and warnings to cut government spending, new Chancellor of the Exchequer Jeremy Hunt has admitted that the medium-term budget plan he will present on October 31 will include “impressively difficult” decisions.

The Institute for Fiscal Studies (IFS) estimates that the cuts needed to balance the government’s books over the next five years will be harder to find than in 2010. This is because of the weaker state of public services, an older population and accumulated problems in the public sector.

After reversing £32bn of tax cuts and reducing the cost of government borrowing by £7bn, the IFS reckons there remains a funding gap of £23bn which Mr Hunt is expected to fill.

“If this was done only by reducing government spending, then we are talking about cuts per ministry of 1.5% every year. This compares with corresponding cuts of 2% in the period since 2010,” noted IFS economist Ben Zaranko.

Economic and social studies think tank the Resolution Foundation also agrees that the cuts will be of the same size as those implemented by Cameron’s Chancellor of the Exchequer, George Osborne.

Chief executive Torsten Bell told BBC radio there was a £30bn funding black hole, even after the new Chancellor of the Exchequer scrapped the mini-budget.

In a first indication of the measures Mr Hunt, a Downing Street spokesman, is aiming to announce for the first time and despite repeated assurances to the contrary from Prime Minister Truss, he stopped short of pledging that pensions would rise in April to the same level as inflation, i.e. by 10.1%.

This means that the government is considering removing the so-called “triple lock”, which stipulates that pensions will increase at the same level as the maximum of the following three percentages: inflation (10.1%), average earnings growth (5 .4%) or 2.5%.

A decision has not yet been made on whether benefits will also increase in line with inflation.

These are two issues that are causing more than just financial and political headaches for Liz Truss, with many of her MPs saying that a smaller-than-expected rise in pensions and benefits would breach the Tories’ election manifesto from 2019.

Meanwhile, the Financial Times reports that Jeremy Hunt is considering raising tax on bank profits, as well as extending beyond 2025 the Johnson government’s tax on energy company super profits.

Also, according to the Times, the Chancellor of the Exchequer wants to delay for at least a year Boris Johnson’s plan to impose a cap on individual spending on the social care services they may need during their lifetime.

It is also expected to limit or delay spending on infrastructure construction and reverse the previous government’s pledge to increase foreign aid spending.

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