£2.5bn more spending cuts as Osborne wields Budget axe
A FURTHER £2.5billion of public spending cuts will be made over the next two years, the Chancellor told ministers yesterday.
George Osborne will use his Budget today to announce that the money will be spent on major infrastructure projects in a bid to boost growth.
The Chancellor and his Lib Dem deputy Danny Alexander ordered Whitehall departments to find 1 per cent savings in 2013/14 and 2014/15 at a pre-Budget Cabinet meeting yesterday.
The cuts come on top of 3 per c e nt s pending reductions announced for the next two years in last year’s Autumn Statement.
But Mr Osborne faced claims that he has caved in to pressure from disgruntled Tory ministers who have repeatedly questioned the need for further cuts to their budgets by giving them some protection from the latest measures.
Health, schools, overseas aid and HM Revenue and Customs will be shielded from the cuts.
The police and local government grants will also be protected this year since the deals have already been finalised, which will please Home Secretary Theresa May and Communities Secretary Eric Pickles.
The Ministry of Defence will also be allowed to roll over a £1.6billion underspend in its budget over the next two years – more than balancing the extra cuts the department will be asked to make.
Defence Secretary Philip Hammond – along with Mrs May and Mr Pickles – have been dubbed the ‘National Union of Ministers’ for publicly questioning the need for more cuts.
Mr Osborne and Mr Alexander said the cuts were possible because government departments have underspent their annual budgets by more than usual. But they will
Downgrade of growth prospects
be controversial since it is rare for a Chancellor to tear up the parameters of public spending set out in government plans mid-year.
They will also mean job losses in departments such as transport and business which are not protected. The cuts will come because Mr Osborne is braced for bad news about the state of the public finances today when the Office for Budget Responsibility is expected to dramatically downgrade its growth forecasts for both this year and next year – making it even more difficult for Mr Osborne to balance the books.
The Chancellor is expected to admit it will take him two years longer than he originally forecast to get Britain’s debts falling.
The changes will make the coalition’s next public spending review somewhat less onerous.
Ministers are due to thrash out spending plans for 2015/16 before the summer. Mr Osborne has called for £10billion of extra cuts. But by cutting budgets for the next two years, Downing Street said there would need to be savings of £1.2billion less in 2015/16.