Osborne, £ 60 bn axeman
But worst cuts since war may still not satisfy credit experts
MIDDLE-CLASS benefit payments and pensions for millions of public sector workers are to be hit by unprecedented spending cuts that may top 20 per cent.
Chancellor George Osborne has laid the ground for the most drastic cuts since World War II, with at least four years of pain to pay back the unprecedented debts left behind by Labour.
He is expected to slash as much as £60billion from annual expenditure, although figures will not be clear until the autumn. But even as the draconian measures were being unveiled, a leading credit agency was casting doubt on whether they would be enough. A report from Fitch said debt had risen faster here than in any other country with a similar international credit rating and warned that Britain faces a ‘formidable’ challenge.
It suggested the UK’s £156billion deficit means it is second only to Ireland in terms of the necessary cuts – with Greece, Portugal and Spain all in a better position.
Economists said they feared the agency was preparing to downgrade the UK credit rating, a move which would push the cost of government borrowing higher.
The Coalition will discuss its plans for cuts in a series of public consultation meetings a round the country over the summer.
Mr Osbourne has singled out tax credits and social security payments – and refused to rule out means-testing child benefit.
Entire areas of public sector activity will be handed to businesses, charities or citizens in a ‘once-in-a-generation’ reassessment of what the state can afford.
As well as slashing the budgets of government departments, reviews will be held into council tax, legal aid, the date at which the state pension age should start to rise to 66, tuition fees and social care.
Mr Osborne told the Cabinet: ‘The challenge that faces us is bigger than any British government has faced in peacetime.’ He reminded colleagues that independent economists had forecast bud- get cuts of between 15 and 20 per cent in most departments under Labour’s own plans. The Coalition is committed to reducing the deficit even more quickly.
The Chancellor later appeared before MPs to kick-start an austerity programme that will last the whole Parliament.
The Treasury traditionally sets spending limits for three years. But Mr Osborne has launched a fouryear review in which every Cabinet minister will have to justify to a ‘star chamber’ of senior colleagues every pound they want to use.
Mr Osborne said that without urgent action, interest rates would rise – hitting millions with higher mortgage payments and pushing up unemployment.
‘This is the great national challenge of our generation: after years of waste, debt and irresponsibility, to get Britain to live within its means,’ he said.
The Coalition is drawing on the success of Canada in turning around an eyewatering budget deficit in the mid-1990s.
Every minister will have to measure their spending against a set of ‘Canadian-style’ questions, which include an assessment of whether a public service can be turned over to a ‘non-state provider’.
Mr Osborne said spending in Whitehall and quangos would be ‘reduced by at least a third’.
The focus on tax credits and social security payments – coupled with a pledge to protect the worst off – suggests middle-class welfare is firmly in the Coalition’s sights.
The public consultation process, inspired by town hall meetings held in Canada, was dismissed as a public relations stunt by former Tory Chancellor Lord Lawson, who said: ‘It is the government’s job to decide what must be done.’
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