Painful tax cuts, austerity to plug £27-bn black hole in the UK

Millions of UK citizens would face economic hardship with more tax rises and benefit cuts in the three years after the 2015 General Election to plug a £27-billion black hole in UK government coffers, according to experts.

The warning has been sounded by the highly respected think-tank, the Institute for Fiscal Studies (IFS), which said it was "close to inconceivable" that such austerity measures could be avoided after forecasts in the chancellor's Autumn Statement showing sluggish growth leaving the UK economy 3.6 per cent smaller in 2016-17 than expectations just nine months ago.

In the fall-out from Wednesday's gloomy mini-budget, doubts were also voiced over the UK keeping its Triple A credit rating following ratings agency Fitch saying it expected by 2015 that debt would be approach the upper limit consistent with retaining the coveted status.

Danny Alexander, chief secretary to the treasury, said he did not regard credit rating agencies "as the be-all and end-all of this", as what mattered was what the markets and the people who bought the treasury's debt to support the deficit, thought of the credibility of the UK.

Echoing the sentiment, chancellor George Osborne insisted international investors continued to regard Britain as "a good investment".

The IFS said in its assessment that the figures in the Autumn Statement suggested in the three years to 2017-18 those Whitehall departments not protected from the cuts would face cumulative reductions totalling 16 per cent in the absence of either welfare reductions and tax rises or if the chancellor took the politically painful decision to allow hospitals, schools and pensions to share the cuts.