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George Osborne defends budget cuts

By Channel 4 News

Updated on 17 August 2010

Chancellor George Osborne has defended the government's programme of budget cuts saying growth and fairness are now his two guiding principles, and tells Channel 4 News that the Ministry of Defence will have to pay for any upgrade of the Trident nuclear deterrent.

Chancellor George Osborne defends his budget cuts (Image: Reuters)

Mr Osborne reaffirmed his commitment to carrying through the cuts in a speech to city analysts in central London today.

He said: "I am optimistic that if we stick to the course we have set ourselves then we can navigate our way through to calmer waters.

"The alternative is to change course which is the surest way to disaster; it would wreck the British economy."

As the government attempts to tackle Britain's record £155bn deficit the chancellor said that public spending will be refocused without sacrificing economic growth or making society unfair. 

In a thinly veiled attack on the previous government, Mr Osborne said: "Fiscal responsibility is both fair and progressive. Governments that lose control of their public finances are the most unfair and unprogressive".

Looking ahead to October's comprehensive spending review, the chancellor said the future "is not about how much the government spends but about what the government actually does with the money".

The coalition is set to tighten public finances by £113bn by 2014/15, with £30bn from tax measures, £11bn from welfare reforms announced in the budget, £10bn from lower debt interest costs and £61bn in cuts to departmental spending.

However in an interview with Channel 4 News - the chancellor suggested the row over the funding of the upgrade to the Trident nuclear deterrent had ended.

Defence Secretary Dr Liam Fox had called for the Treasury to fund its £20bn cost - however Mr Osborne said the Ministry of Defence would have to pay.

"I'm very clear that the replacement of the nuclear deterrent, the Trident renewal programme, has to come from the Ministry of Defence's budget, and they know that," he said. 

Attacking the Deficit Deniers
The Chancellor has made an important intervention today, writes Channel 4 News Economics Editor Faisal Islam.

It does seem that the Treasury has been a little stung by suggestions that the George Osborne's harsh austerity message has hit consumer and business confidence, like Nick Clegg yesterday who is trying to show a little "light at the end of the tunnel".

Today Osborne attacked the "Deficit Deniers" that he saw in Labour's leadership campaign. He may hear the echo of some support for this from his predecessor Alistair Darling's speech tonight - and as former city minister Lord Myners has argued: "There's nothing progressive about a deficit".

The chancellor however has yet to prove that the new measures he took in June are indeed better for the poor than for the rich - as the IFS concluded that they were "somewhat regressive".

Osborne's message today: more fairness, less fear. The jury is still out on both matters though.

To back up his argument for cutting his way out of the recession, Mr Osborne looked to the left as well as right of the political spectrum quoting Roy Jenkins and James Callaghan.

He said: "It was Roy Jenkins who warned that governments could not keep pushing up public expenditure and maintain the values of a plural society with adequate freedom of choice".

The chancellor's speech follows the publication of July's inflation figures earlier today which showed inflation slowed to 3.1 per cent from June's 3.2 per cent which is the lowest since February.

However it is the eighth consecutive month it has exceeded the Bank of England's 2 per cent target.

Earlier in the week Sir Alan Budd, the outgoing head of the government's tax and spending watchdog, said he was "not confident" the UK would escape a double-dip recession.

But Mr Osborne insisted that the government's spending measures are not a gamble and said Labour's plans for £44bn in cuts were unspecified. 

"What was [Labour's] plan to deliver these cuts? Well, I've searched for it and I can tell you - there was no plan. Out of that £44bn, not a single penny had been allocated to any significant public spending programme," he said.

"To say we must deal with the deficit, but refuse to say how, is simply taking the British people for fools."

Who knows who looks at George Osborne, where the power lies

He added that the cuts programme was a collaborative exercise, saying: "People are debating these issues up and down the country.

"Anyone who is serious about tackling the nation's debts needs to come forward with an alternative plan.

"Both those who deny the need to cut the deficit and those who refuse to say how to do it are placing themselves outside of the domestic and international debate.

In answer to accusations that the government's plans were unfair and would hit the poorest harder, Mr Osborne said, "We are all in this together, and the spending review we will produce in two months time will show that."

Past mistakes
Shadow chancellor Alistair Darling spoke out today on the new government's treatment of the economy, and looked back on his own tenure.

He told Channel 4 News that mistakes had been made by his government in terms of the economy - but only in how they communicated their successes, rather than the policies they used.

"I think we did the right thing by preventing the banking system from collapsing, by supporting the economy with the result that we got through the recession and back into growth far more quickly than would otherwise be the case," he said.

"But I think we should’ve been far clearer, firstly as to why the deficit had risen in the first place, because our revenues had collapsed during the downturn, but secondly, yes you had to get your deficit down, you had to do it over a sensible period and in a balanced and measured way, but also that the at the same time government had a role to play in order to ensure we got recovery and to secure growth in the future."

"Now patently because we lost the election – we didn’t make that case as effectively as we could have done."

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