x Abu Dhabi, UAEMonday 22 January 2018

Britain cuts spending by £6.25bn, with more on way

The country's Conservative chancellor and his Liberal Democrat deputy warn debts left unchecked 'would derail the economic recovery'.

LONDON // Britain's new coalition government yesterday embarked on the first, savage round of public spending cuts in a bid to tackle the country's record budget deficit. In the last financial year, that deficit amounted to more than £150 billion (Dh550bn). Yesterday, the Conservative chancellor, George Osborne, and his Liberal Democrat deputy, David Laws, jointly unveiled plans for an immediate £6.25bn cut in "wasteful" public spending.

Few doubt there are even deeper, more painful cuts on the way - cuts that the former Labour government said it would not implement this year for fear of affecting the UK's fragile recovery from recession. But Mr Osborne told the House of Commons yesterday that the new government had to be seen to be "getting on with the job" by cutting spending by bureaucrats. "In the space of just one week we have found and agreed to cut £6.25 billion of wasteful spending across the public sector," he said.

Although Mr Osborne promised that such "frontline" services as health and schools - though not universities - would be protected, he announced a freeze on civil service recruitment, cuts across Whitehall departments, reductions in road building programmes and an end to government cash trust funds given to newborn children. The number of quangos (quasi-autonomous non-governmental organisations) is also to be slashed and there are to be cuts in IT programmes, civil service travel and the use of outside consultants.

Mr Laws said: "The years of public sector plenty are over, but the more decisive we react, the more quickly and strongly we can come through these tough times. "This is only the first step on what will be a long road to restoring good management of our public finances. "Even tougher decisions undoubtedly await us, in the budget this year and in the autumn spending review, if we are to restore responsibility after the years of Labour extravagance and mismanagement of our public finances."

Mr Laws said the government could not watch public debt rise at the rate of £3bn per week. "Our huge public debts threatened financial stability and if left unchecked would derail the economic recovery. "Public borrowing is only taxation deferred and it would be deeply irresponsible to continue to accumulate vast debts that would have to be paid off by our children, and our grand children for many decades to come."

Among the biggest losers are the transport department and the department for communities and local government, as well as white collar workers at the ministries for business, education and justice. The devolved administrations in Scotland, Wales and Northern Ireland will also be expected to make cuts totalling more than £700 million, although they will have the option of delaying the reductions for a year.

Alistair Darling, the Labour Party's "shadow" chancellor, attacked the plan and called on the coalition to "come clean on the detail of what these cuts mean". "Today, they dodged the House of Commons because they didn't want to have to explain the real impact on firms and families," he said. "Today, George Osborne wouldn't say how many jobs this package would cost. But it is already clear that these cuts will seriously affect support for business, mean less jobs for young people, and hit student places for this September."

Liam Byrne, who was Labour's chief secretary to the treasury before the election, said he believed that the new government was taking a risk with the economy. "Our fear is that the coalition has embarked on the wrong way to bring down [the deficit] by cutting back too early and taking a risk with the economy, but second by hitting the investment that business needs to shift into manufacturing and train local workers for new jobs," he said.

Patrick Nolan, the chief economist at Reform, a centre-right policy think tank, also suggested that it was not "credible" for the government to claim it could reduce the deficit without cutting health and welfare budgets. Unions fiercely criticised the spending cuts, warning the government that it had taken an "economic wrong turn". Brendan Barber, the general secretary of the Trades Union Congress, an umbrella organisation of UK unions, added: "Taking any money out of the economy at the moment is dangerous as there is a real risk of a double-dip recession, which will only damage the state of the public finances further."

Gail Cartmail, the assistant general secretary of the Britain's largest union, Unite, said: "While the cuts, such as reductions in civil servants' travel, management consultants and quangos, may appear to be peripheral to the central deficit debate, this is the harbinger of some very painful cuts that will come in the budget and in the comprehensive spending review in the autumn." However, Stephen Robertson, the director general of the British Retail Consortium, said: "These cuts, substantial and soon, are a welcome indication that the government recognises spending cuts must be the main means for sorting out the public finances."