Osborne Defends Plans Amid Fears Over Cuts

George Osborne has defended his economic plans amid claims he is set to plunge Britain into a period of austerity not seen since the 1930s.

The Chancellor grabbed headlines with the historic stamp duty reforms he announced , but the government spending watchdog said cuts of £60bn to non-protected areas like police, local government and justice will be required if he is to meet his targets.

The Office for Budget Responsibility (OBR) said public spending would have to fall to 35.2% of GDP by 2019/20 if Mr Osborne is to eliminate the deficit by the end of the next parliament.

OBR chairman Robert Chote said a "very tight further squeeze" on public services would be needed - including the loss of a further one million public sector jobs - driving down public spending to an 80-year low.

The Institute for Fiscal Studies has said the plans laid out in the Autumn Statement will require "spending cuts on a colossal scale" after next year's general election.

Mr Osborne told Sky News his plan to clear the deficit by 2020 was "balanced".

He said: "We're taking a number of years because I think that's the right pace. The path we're on has given Britain not just the fastest growing economy in the world, but it means ... you've got real world evidence that we've got the right long-term plan."

He justified the "giveaways" in his Autumn Statement, saying the country "can't afford not to" invest in areas like roads and flood defences.

"It's precisely because we didn't invest in those things in the last decade that our country was not equipped for the modern economy," he said.

"We've got to make sure our deficit is coming down but we shouldn't do that at the expense of the big long-term investments that secure jobs for generations to come."

The Chancellor was scathing about his Liberal Democrat coalition partners after Business Secretary Vince Cable said his plan to bring public spending down to 35% of GDP was "wholly unrealistic".

He said: "In private they sign up to these decisions but then in public they slag them off. But that's for them to explain to you."

Shadow Chancellor Ed Balls said Mr Osborne was being forced to accelerate spending cuts because he had failed to balance the budget.

He told Sky News: "He said he'd make people better off and that hasn't worked. People's wages are still falling compared to prices.

"And it's that cost-of-living crisis which means for the next few years the revenues aren't coming in and he's got a huge problem and he's saying he can somehow solve this with bigger spending cuts than before."

He said the Chancellor's promise of tax cuts worth £7bn in the next parliament were an "unfunded fantasy".

But he said Labour would keep the stamp duty reforms and abolition of air passenger duty for children, while making savings by measures including reversing top rate tax cuts and taking winter fuel allowance away from rich pensioners.

The stamp duty changes that could cut £4,500 off the cost of an average home have come into force - a move welcomed by thousands of buyers.

The new rates will apply progressively and see house-buyers pay 0% on the first £125,000, then 2% on the portion up to £250,000, 5% up to £925,000, 10% up to £1.5m and 12% on anything above that.

The changes will cost the Treasury "nearly £400m" over the next four months, according to the Office for Budget Responsibility (OBR).