George Osborne’s budget saving ‘shortfall’

A report today claims the shadow chancellor’s proposed savings would fall £3 billion short and take five years longer than he estimated.

At the Tory party conference George Osborne confirmed reports that under a Conservative government the state retirement age would rise to 66 ten years earlier than planned, saving £13 billion a year from 2016.

But a report in the Guardian today claims the National Institute of Economic and Social Research (NIESR), on whose research Mr Osborne based his report, has said he made a mistake and misread a paper written by them earlier this year.

The newspaper quote the NIESR as saying Osborne’s aides originally based their calculations on a NIESR document in the House of Commons library, and following his speech the thinktank sought clarification of his assumptions. It has recalculated the figures and will present them at a conference on Monday.

Last Tuesday, the shadow chancellor admitted he planned to raise the state retirement age to 66 for men. His proposals would see the retirement age rise ten years earlier than planned, saving £13 billion a year from 2016, he claimed.

He said: “No one who is a pensioner today, or approaching retirement soon, will be affected. But this is how we can afford increasing the basic state pension for all.”

But opposition parties were quick to judge, and today’s Guardian claim casts doubt on whether Mr Osborne is a suitable candidate for chancellor.

Writing in the Guardian today, David Blanchflower, respected economist and former member of the Bank of England’s monetary policy committee, wrote: “We are in the midst of the worst recession most people alive have ever experienced, or will probably ever experience.

“Lesson one in a deep recession is you don’t cut public spending until you are into the boom phase. The consequence of cutting too soon is to drive the economy into a depression. The Tory economic proposals have the potential to push the British economy into a death spiral of decline.”

And the Liberal Democrat treasury spokesman, Lord Oakeshott, was quoted as saying: “This saga of incompetence shoots to pieces his claims to be a responsible chancellor.”

The paper also quote a spokesman for Mr Osborne defending his plans, saying the £13 billion savings included inflationary rises between 2009 and 2020, and that the difference between £10 billion and £13 billion was therefore “presentational”.