Os­borne, £ 60 bn ax­e­man

But worst cuts since war may still not sat­isfy credit ex­perts

Daily Mail - - News - By James Chap­man Po­lit­i­cal Edi­tor

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.’

Com­ment – Page 14

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