Spending cuts ahead could be as deep as those seen during the Tory austerity programme which followed the 2008-09 banking crash, economists have warned.
It comes as Labour accused Lis Truss’s new chancellor Jeremy Hunt of leading the push for “austerity season two”, as he looks to balance the books after the disastrous mini-Budget.
And experts have warned that families face annual household energy bills of £5,000 from April after the government’s U-turn on the promise of two years of support.
The Resolution Foundation said many middle-income families may be unable to pay energy bills next year after the two-year universal support package was ditched.
Chief executive Torsten Bell said on BBC Radio 4’s Today programme there was a fiscal black hole of around £30bn even after Mr Hunt scrapped nearly all of the tax cuts from the mini-Budget.
“These are big numbers. If we are talking of spending cuts between £30bn to 40bn then they’re not that far off the scale of the cuts announced by George Osborne back in 2010,” he said.
On the scaling down of energy support, Mr Bell said: “It’s a big deal, if he [Mr Hunt] did scrap all of that he’s saving up to £40bn – but it’s a big deal for households too because our bills are due to hit £4,000 in April.”
He added: “Even middle-income households won’t be able to afford those bills next year. So he’s done the easy bit, scrapping the existing scheme, what he’s got to do is some hard work about how he intends to provide support for lower and middle-income households next year.”
The Resolution Foundation predict annual energy bills of £4,000 from April – but other experts warned they could surge even higher once the government’s cap on the unit price of energy ends after six months.
The Cornwall Insight consultancy said the price for a typical annual dual-fuel tariff will now be £4,347 in six months’ time, while consultancy Auxilione said average bills could hit £5,078.
The National Grid issued a warning that Britons should prepare for some energy blackouts between 4pm and 7pm on “really, really cold” weekdays in January and February.
Meanwhile, shadow chancellor Rachel Reeves said Labour would oppose spending cuts to schools, police and the NHS and she claimed economic mismanagement had forced the government to tighten the public purse strings.
She told BBC Radio 4’s Today programme: “The latest chancellor, the fourth in four months, was a key architect in austerity season one, and he’s now saying that what we need is austerity season two.”
“Our public services – our schools, our hospitals, our police force – are already on their knees. Nobody was speaking about the need for spending cuts a month ago. The reason why they are now on the table is because of the huge damage the Tories have done to our economy,” Ms Reeves added.
The shadow chancellor said the Tory government had made the UK a “global laughing stock” and the nation had “lost its way”.
Mr Hunt – who announced a U-turn on income tax cuts as part of a complete reversal of Ms Truss’s agenda – said spending decisions of “eye-watering difficulty” lay ahead and no area of spending was “off the table”.
The future of the “triple lock” protection for state pensions was thrown into doubt after the chancellor refused to commit himself to keeping it.
Armed forces minister James Heappey threatened to quit if Mr Hunt backed down on the pledge to spend 3 per cent of GDP on defence by 2030.
Asked if he would quit in the face of a U-turn, Mr Heappey told LBC: “Yeah. But no one has said that 3 per cent is not going to happen by 2030.” He insisted he would quit if that changed, however, adding: “We need to be spending 3 per cent of our GDP on the defence of our nation.”
Defence secretary Ben Wallace – tipped as a leadership contender if Ms Truss is forced out – is said to have sent a message to Tory MPs urging them to give the PM more time.
Those close to Mr Wallace have said he would withdraw support from the prime minister if she ditched her pledge to increase defence spending.
An ally of Penny Mordaunt held talks with Rishi Sunak last week and suggested he could be Ms Mordaunt’s chancellor as part of a “unity ticket” if Liz Truss is forced out, according to The Times.
But Sunak is said to have rebuffed the “tacit” offer. “None of the other potential candidates carry that economic credibility with them,” a Sunak ally said. “He still wants it.”
