Cuts 'shockwave' for Whitehall

The Lib-Con coalition unveiled a £6 billion downpayment on its drive to slash the public deficit today - insisting the "draconian" measures should send a "shockwave" through Whitehall.

Big-ticket savings included £1.15 billion off spending on government consultants, advertising and travel this year, £1.7 billion from halting or delaying major projects, and £600 million from scrapping quangos.

Chancellor George Osborne said the coalition was "getting on with the job" of stopping "wasteful" spending, while his Lib Dem deputy, David Laws, warned the reductions were only a "first step" and tougher action would follow.

They insisted that politicians would be taking their share of the pain, with ministers only granted dedicated cars in "exceptional circumstances" and expected to "walk or take public transport" most of the time.

Video: £6bn cuts revealed

Some £500 million of the £6.24 billion cuts identified will be recycled into programmes for boosting jobs and skills, while the rest will go to pay down the Government's £156 billion deficit.

However, opponents immediately started highlighting details of the announcement which are likely to prove unpopular - including freezing Civil Service recruitment, cutting back on university places, and scrapping Child Trust Funds.

The biggest loser is the Business Department headed by Lib Dem Vince Cable, which is losing £836 million from its budget.

Department for Education spending is being cut by £670 million - although the schools budget will now be protected this year, along with the NHS, defence and international development.

Spelling out the reductions alongside Mr Osborne at the Treasury, Mr Laws said: "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."

The Treasury Chief Secretary announced he would be heading an "efficiency and reform group" with Cabinet Office Minister Francis Maude to help push through the savings quickly and hold bodies to account.

Mr Laws admitted that some within government had questioned whether the restrictions in areas such as consultancy, advertising and travel were "too draconian".

"Actually, my view is that, unless we send out this sort of shockwave through Government departments to say 'You can't spend on all these areas', that they are not actually priorities, we won't get the step change in behaviour we expect," he said.

"So we are being very draconian and very inflexible, deliberately, over the next year to drive out these types of costs."

Mr Laws admitted there would be "disappointment to some parents" that Child Trust Fund payments for newborns were ending from January 1, and for seven-year-olds from this August. But he pointed out that some of the £320 million saved would be used to fund extra "respite breaks" for disabled children.

Mr Osborne claimed the coalition had conducted the "fastest and most collegiate spending review in recent history".

"That is what this new Government is all about," he said. "Rolling up our sleeves, getting on with the job, working together in the national interest, delivering on our promises, getting a grip."

However, Shadow Chancellor Alistair Darling called for 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 fewer jobs for young people, and hit student places for this September."

Public and Commercial Services union general secretary Mark Serwotka said: "A recruitment freeze now, when tens of thousands of Civil Service posts have been cut in the last few years, will further add to workloads and put at risk the services our members provide to the public."

Sally Hunt, general secretary of the University and College Union (UCU), said the number of extra university places available this year would be halved to 10,000.

"The Government should stop pretending that 'We're all in this together'," she said. "Today it dashed the hopes of thousands of people by halving the number of additional student places at universities this year."

Brian Morris, head of savings at the Building Societies Association, branded the scrapping of Child Trust Funds "disappointing".

"It will hit hardest those on lower incomes since higher income families are more likely to save without the incentives that CTFs offer," he said.

Mr Laws said it was "impossible to come up with any estimate" of the number of job losses the cuts would result in.

And he insisted, amid reports of up to 300,000 facing the axe, that in fact the package could help protect jobs across the whole economy.

"Most of the reduction will take place through the recruitment freeze which is a far better way of managing the number of jobs downwards than making redundancies of existing staff," he told BBC Radio 4's The World At One.

Early action would keep interest rates low and enable Labour's planned National Insurance rise to be halted, helping protect jobs, he suggested.

"So it is far from clear that the overall result of this package will be to reduce employment. It may, across the whole of the economy, help to preserve employment."

Shadow education secretary Ed Balls, a candidates in Labour's leadership election, told the programme: "It is a complete fantasy to suggest that you can make cuts on this scale without putting frontline services and jobs at risk.

"Just at the point when we need to get unemployment down and secure recovery, what the Conservatives and Liberal Democrats have decided to do, in a fantasy announcement in terms of detail, is actually to say to families and to businesses 'We are going to put the recovery at risk'. That is a very, very dangerous moment."

David Blanchflower, a former member of the Bank of England's Monetary Policy and a consistent critic of early cuts, said the UK risked entering a "death spiral".

"As growth gets lower then you will need more cuts and then growth will get lower and then you will need more cuts. So this just seems to me to be pushing us towards the death spiral.

"It is a start that we just don't need. No other country is sensibly doing this kind of action and this seems to me to be basically a very dangerous thing to do."

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