Chancellor discusses cuts with ministers

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Chancellor Alistair Darling has been holding a series of meetings with his Cabinet colleagues to identify areas where spending can be cut, it was reported today.

The BBC claimed Mr Darling was having "one-on-one" discussions with ministers and telling them to identify savings.

The process had started since Prime Minister Gordon Brown admitted for the first time this week that Labour would make cuts in public spending.

A Treasury spokesman said Mr Darling met with fellow ministers "all the time" and that spending inevitably formed part of their discussions.

He said meetings would continue to take place in the run-up to the Pre-Budget Report later this autumn, but played down the reports that a special set of discussions to identify potential targets for cuts had been initiated in the wake of Mr Brown's speech to the TUC in Liverpool.

News of the meetings follows claims that Treasury figures leaked earlier this week by the Tories imply the UK will have to embark upon the tightest squeeze on public spending since the IMF-imposed cuts of the late 1970s.

The cuts could see Labour's increases in spending on public services over the past 12 years wiped out, unless a future administration chooses to increase taxes or slash benefits, the Institute for Fiscal Studies warned.

The leaked Treasury estimates envisage annual cuts in expenditure by Whitehall departments of 2.9% in real terms between 2011 and 2013 in order to meet Mr Darling's goal of halving the £175 billion deficit within four years.

The Prime Minister told the TUC this week that Labour will "cut costs, cut inefficiencies, cut unnecessary programmes and cut lower priority budgets" in order to meet its target of halving the £175 billion deficit within four years.

But he said Labour would not "support cuts in the vital front-line services on which people depend".

Shadow chancellor George Osborne claimed leaked Treasury documents show Mr Brown "misled" Parliament on the scale of planned spending cuts, a claim denied by Downing Street.

Liberal Democrat Treasury spokesman Vincent Cable warned it would be "disastrous" to make deep cuts in public spending when the economy was struggling to emerge from recession.

But he said action was needed to cut the deficit by £80 to £100 billion in the years ahead.

He told BBC Radio 4's Today programme: "I don't think you can rush into this.

"We are still in the middle of a very difficult recession, unemployment is still rising. To rush in now with cuts in services, people losing their jobs would be disastrous, it would make the recession worse.

"What we have to have is a very clear plan as to how this whole process is going to be dealt with in the years ahead."

He added: "Simply contracting government spending, increasing taxation at this moment in time runs the risk of getting us into a deeper recession which means the deficit is even worse."