George Osborne: more cuts to come in 'year of hard truths'

BRITAIN faces more "painful cuts" in order to put the economy on a sustainable footing, George Osborne is due to announce.

In a speech in Birmingham later today, the chancellor is expected to say that permanently cutting spending is the way to permanently cut taxes.

The deficit is down by a third but Britain is borrowing about £100bn a year, he will say, and using half of that money to pay the interest on its debts.

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"We've got to make more cuts,” he is expected to warn, as he sets out a five-point plan to help the economy. “That's why 2014 is the year of hard truths."

He will ask: "Do we say: 'The worst is over, back we go to our bad habits of borrowing and spending and living beyond our means and let the next generation pay the bill'?"Or do we say to ourselves, 'Yes, because of our plan, things are getting better – but there is still a long way to go and there are big, underlying problems we have to fix in our economy'?"

Speaking on the BBC's Andrew Marr Show yesterday, Prime Minister David Cameron suggested there could be further cuts to housing benefits. He also refused to rule out scrapping provisions for elderly people, which include free TV licences, bus passes and winter fuel allowances.

However, Cameron has promised to keep the so-called "triple lock" on pensions until at least 2020 if the Tories remain in power. This would mean increasing pensions annually in line with inflation, average earnings or 2.5 per cent, depending on which is highest. With 16 months until the next election, he suggested the Conservatives would be pledging more welfare cuts and more tax cuts in the party’s 2015 manifesto.

Meanwhile, Labour has said Osborne should admit his policies have failed and have led to a cost-of-living crisis. Chris Leslie, shadow chief secretary to the Treasury, said that while "millions of ordinary working people are worse off under the Tories", Osborne and Cameron were "paving the way for yet another top rate tax cut for millionaires".