Mr Osborne has various options to soften the impact of his cuts in tax credits, but all of them will cost him some money. Admittedly, this might “only” be a couple of billion for a couple of years. But it does not come at a helpful time, given that borrowing this year is already on course to overshoot the OBR’s forecast. The Chancellor could just allow borrowing to be higher than otherwise. After all, he has some wiggle room in his fiscal plans. And it might be hard to find offsetting savings elsewhere in the welfare budget that are politically palatable. Alternatively, the next round of cuts in departmental spending might have to be deepened a bit.
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