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Wednesday 26th of May 2010
May 24, 2010    

Chancellor unveils £6.2bn spending cuts

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by Kay Murchie
”Chancellor

Chancellor George Osborne has today unveiled details of the new coalition Government’s plans to shave £6.2 billion off public spending this financial year.

The new Con/Lib coalition Government has said trimming the budget deficit is one of its priorities.

However, Mr Osborne’s predecessor, Alistair Darling, warned that cutting the deficit too quickly could pose a threat to the fragile recovery.

Furthermore, prior to the general election, the Liberal Democrats said such measures could threaten the recovery but have now endorsed the cuts.

Mr Osborne believes that tackling debt is now a major issue for European Governments, and claims: “Our huge public debts threatened financial stability and if left unchecked would derail the economic recovery.”

He added: “We have conducted the fastest and most collegiate spending review in recent history. That is what this new government is all about.”

However, unions have warned that the cuts would hit services, be harmful to the economy and put thousands of jobs at risk.

Mr Osborne said there would be a civil service recruitment freeze, as well as reductions to IT programmes, property and quangos.

The Child Trust Fund (CTF) will be scrapped altogether from January 2011, in a move expected to save £580 million year.

CTFs were introduced by the Labour Government in 2005 and have been available to every child born after September 2002. The Government gives a £250 voucher, rising to £500 in the case of low income families, to all newborn babies.

Osborne admitted there would be “disappointment to some parents” but defended the move by saying CTF money that would have gone to disabled children would instead be used to provide respite care.

He also argued that almost one million families (25%) failed to open a fund for their child in the first four years of the scheme.

In the meantime, Mr Osborne also outlined departmental cuts with £683 million at the Department for Transport, £780 million at Communities and Local Government, £836 million at Business, £670 million at Education and £325 million Department for Justice.

The devolved administrations in Scotland, Wales and Northern Ireland would have to £700 million.

Furthermore, local authorities will be expected to save £1.165 billion.

Savings on “discretionary spending” such as consultancy, advertising and travel costs will amount to £1.15 billion.

Commenting on the cuts, Mark Littlewood, Director General of the Institute of Economic Affairs, said: “Rightly a high proportion of these initial cuts will be borne by the department of Business. The flawed industrial activism policy pursued up to now must be abandoned.

“A strategy based on government deciding which ideas are likely to be commercially successfully is bound to fail. It is therefore of concern that some of the future spending plans look set to ignore this fact,” he added.

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