George Osborne goes for growth (by firing 10,000 civil servants)

Chancellor warns he will squeeze departmental budgets so he can find £5bn to boost economy

More than 13,000 civil service jobs could be axed as a result of an extra £5bn of spending cuts to be announced by George Osborne in his Autumn Statement.

The Chancellor told cabinet ministers today that his squeeze on their departmental budgets would be tightened so he can switch money from day-to-day spending to building projects to help secure economic growth. They include up to 100 new free schools and academies, providing an extra 50,000 places where they are most needed at a cost of £1bn;  science, skills and transport projects.

Most departments will have to shave 1 per cent off their running costs in 2013-14 and save 2 per cent the following year, saving £3.4bn on top of existing cuts. The rest of the “go-for-growth” funds will come from underspent Whitehall budgets. Funds for health, schools, overseas aid, nuclear decommissioning and HM Revenue & Customs will be protected and the Ministry of Defence will be allowed to carry forward spending from one financial year to the next.

Treasury sources said frontline services would be safeguarded and most of the savings would come from administration, but admitted that some jobs would be lost. They said the “gold standard” was the Department for Education, where Michael Gove’s “zero-based” review is expected to cut 1,000 civil service jobs, a quarter of the total.

The Public and Commercial Services Union predicted last night that the new cuts would mean almost 13,500 civil service jobs being lost, in addition to the 50,000 due to be axed over the next two years and the 63,000 already cut since 2010.

Ministers argue that the building projects will create jobs as well as growth. The independent Office for Budget Responsibility will update its March forecast that the 730,000 public sector job losses between 2011-17 will be outweighed by the creation of 1.7 million jobs in the private sector.

Work and Pensions will be among the non-exempt departments facing pressure for job cuts. Mr Osborne will also announce more savings on the benefits bill, with payments like jobseekers allowance likely to rise by less than inflation next April. In return for accepting that, the Liberal Democrats are likely to win a squeeze on the rich, through a cut in the maximum £50,000 a year of pension contributions that attract tax relief.

The Chancellor faces the embarrassment of seeing the OBR downgrade its growth forecasts and having to admit he may miss his key fiscal target to see total government debt falling as a share of GDP by 2015-16. He will trumpet the £5bn switch as a sign that, with the eurozone struggling, the Government is doing everything it can to secure growth without departing from its deficit-reduction strategy. He will argue that average annual spending on building projects will be slightly higher under the Coalition than the previous Labour Government.

A Treasury spokesman said: “We are committed to solving today’s problems, but also preparing for tomorrow’s challenges by investing in our future and equipping Britain for the global race.”

Labour dismissed the £5bn spending boost, claiming that none of the road building projects announced a year ago had started yet.

Rachel Reeves, the shadow Chief Treasury Secretary, said: “The Chancellor seems to have finally admitted that abolishing the Building Schools for the Future programme and his other deep cuts to infrastructure investment were a catastrophic mistake which cost jobs and weakened our economy. But this extra funding for new free schools will be smaller than the huge cuts he made two years ago to school and college buildings. George Osborne must explain which frontline services he will cut further to pay for this.”

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA celebration of British elections
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Senior Digital Marketing Consultant

£28000 - £45000 per annum: Recruitment Genius: A Senior Digital Marketing Cons...

Recruitment Genius: Assistant Stores Keeper

£16640 - £18500 per annum: Recruitment Genius: An Assistant Stores Keeper is r...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Software Developer - C# / ASP.NET / SQL

£17000 - £30000 per annum: Recruitment Genius: Developer required to join a bu...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living