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Osborne’s austerity creates £17bn ‘black hole’

Britain's pay freeze hits tax income

CHANCELLOR George Osborne's bruised and battered economic "plan" received another dent yesterday with news that his cuts policies have punched a £17 billion black hole in Britain's bank balance this year.

Below-inflation pay rises and pay freezes have seen the Exchequer's takings fall drastically short of predictions made in June 2010 a few days after the Tories came to power.

The Office for Budgetary Responsibility's (OBR) conservative calculations following two years of Labour's economic investment strategy expected income tax receipts of £176bn this year.

But within weeks Mr Osborne and other Con-Dem ministers had drawn up public spending cuts worth tens of billions.

Against a backdrop of plunging earnings and a stagnant economy, the actual income tax take in 2014-15 is set to hit £159bn - a full £17bn shy of the 2010 target.

The Trades Union Congress (TUC) calculated that the 10 per cent shortfall versus the OBR's original expectations was the equivalent to raising the basic rate of income tax by 4p in the pound.

TUC general secretary Frances O'Grady said: "The Chancellor's sums just don't add up - he can't make the tax cuts for the better off that he is promising and meet his deficit reduction target without making cuts to public services."

But she warned: "More austerity would only keep us stuck in a downward spiral.

"The Chancellor should use next week's Autumn Statement to invest in growth and to put a wages recovery at the top of the agenda."

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