21 Oct 2010

Spending review: Osborne defends cuts

Chancellor George Osborne is defending his £81bn round of spending cuts amid claims he’s making a “reckless gamble” which will hit the poor hardest.

The Chancellor is today defending the government’s spending review, saying the measures – which will see 490,000 public sector jobs culled – are “necessary”.

Mr Osborne said that while “there is a hard road ahead” it was necessary to “move Britain out of the financial danger zone”.

“I have made some decisions to help people on low incomes, particularly families and children in those families, but I have paid for this by trying to curb the cost of the welfare state and reform the welfare state.

“People are angry when they see some of their money that they earn being abused in the welfare system. We are trying to reform the welfare system, curb the benefits bill, so we can go on paying for the healthcare system, education, and indeed the investment in our economy that we need.

“I would say the big gamble would be not to deal with our debts.” Chancellor George Osborne

“We are trying to make savings everywhere, we’re leaving no stone unturned in the search for waste in Whitehall.

“I would say the big gamble would be not to deal with our debts.

“The country knows there was a huge debt problem and if we didn’t deal with it it would lead to economic disaster.”

“I have chosen, in part, to pay for that, as part of the deficit reduction plan, by trying to curb the rise in the benefits bill.

“If we don’t deal with the rapid rise in things like the housing benefit bill, which is now greatly more than we spend on the police, then we will have a real problem.”

But the economic thinktank, the Institute for Fiscal Studies, has warned that the massive round of austerity measures may not be enough to meet government targets and clear the deficit.

The IFS said the cuts would have a “regressive” effect, hitting the poor harder than the rich, and could “reduce the quantity and quality of some public services” to such an extent that the government may want to put more money back in.

IFS acting director Carl Emmerson recommended the government review the cuts package after two years.

“Should this deterioration prove too great for the Government’s liking then the Chancellor might wish to top up his spending plans. A review of these spending plans in two years’ time would be a sensible move.” Mr Emmerson said.

Spending Review Snowcloud
Spending Review Snowcloud
Read between the lines of the Chancellor's Spending Review in an interactive Snowcloud.

Spending review: where the axe will fall

Labour accused the Chancellor of taking a huge gamble with the economy.

Shadow chancellor Alan Johnson said that the spending review had been “unfair as well as unwise”, adding that some of the statistics quoted were “even untruthful” .

“We believe the way we bring down the deficit needs to be steady, needs to be sure. This slash and burn approach is something we wouldn’t do,” Mr Johnson said.

‘Back from the brink’
Mr Osborne yesterday told the Commons the government’s spending review was necessary to “pull Britain back from the brink of bankruptcy”.

He confirmed 490,000 public sector jobs are to be shed over the next four years, as Whitehall departments cut their budgets by around a fifth in real terms.

But the Chancellor has been boosted by the Fitch ratings agency, which said the spending review should help the UK retain its prized triple-A credit rating.

The welsfar The police, prisons, universities and local councils will also be hit hard by deep cuts.

Mr Osborne also raised the pension age to 66 for both men and women by 2020, which is set to save £5bn a year.

‘Driven by necessity’
Treasury Chief Secretary, Liberal Democrat Danny Alexander, rejected Labour’s claims that the cuts were driven by political motives, rather than necessity.

“We came into office when Britain was on the brink of bankruptcy. We have had to get ourselves out of that position,” he said.

“Did I come into politics to cut public spending? Of course not. But that doesn’t mean we are not going to see this through, because it is the right thing to do to get the economy back on track.”

“Those people who say it is a choice between economic growth and deficit reduction are just wrong. You have to do the deficit reduction as a firm platform for economy growth going forward.”

Spending review 'conceals a lot of pain'
George Osborne is making much of having undershot Labour's notional departmental spending average of 20 per cent, writes Political Editor Gary Gibbon.

But that's a dubious comparison. And it conceals a lot of pain…on public sector jobs, public sector pensions, welfare, still on capital spending, despite the £2bn uplift.

There's detail still to come on the impact of the housing budget cuts, just what various constabularies intend to cut in terms of police numbers and much much else.

The £6bn forecast for administrative savings on top of all the savings already announced will be classified by some as a "heroic assumption" – for the record it's the one third cut the Tories promised in opposition. It will be largely jobs as that is what administrative costs are largely taken up by.

Labour says it will prove later on that the money flashed around by Nick Clegg last week for the pupil premium was raided out of other parts of the education budget and makes a nonsense of the schools budget being protected.

They'll also say that the tiny increase in spending on schools doesn't anyway match 0.7 per cent increase pencilled in by Ed Balls as schools secretary which he always said was necessary just to stand still with increasing school rolls.

Read more analyses of the spending review of the politics blog