Union leaders and public urged to debate deficit

Politicians, trade union leaders and members of the public were invited today by the Government to engage in the debate on how to cut the budget deficit and ensure Britain lives within its means.

Chancellor George Osborne told the Commons that after inheriting the largest budget deficit in the EU from Labour the country faced a "serious national challenge".

He said whoever won the election was going to have to face up to the fact that the deficit was not going to "automatically reduce" as growth returned because it was "structural".

Ministers wanted to ensure that all political parties, "the brightest and best brains across Whitehall and the public sector," voluntary groups, think-tanks, unions and members of the public "are all engaged in the debate and the discussion about how collectively we deal with the problem".

Mr Osborne added: "After all it is our collective national debt." The debate was about "how the country lives within its means".

The Chancellor will later set out a framework for the introduction of "painful" spending cuts which David Cameron said would affect the lifestyles of everyone in Britain over the coming years.

In debate on the Queen's Speech, he is expected to tell MPs how they will draw up a "once-in-a-generation" spending review this autumn, which is expected to slash as much as £60 billion from annual expenditure.

Mr Osborne will announce the establishment of a so-called "star chamber" of ministerial and civil service heavyweights before which departmental ministers will be required to justify their budgets.

Labour's Tony Lloyd (Manchester Central) warned that the Government's strategy risked putting the country into a "double-dip recession" with "losers" across the nation.

Mr Osborne told him: "Let's be absolutely clear who the losers would be if we did not deal with this record budget deficit. The whole country would lose out.

"There would be higher interest rates, more businesses would be going bust, international investor confidence would be lost.

"Given that Britain has got the largest budget deficit of any advanced economy, we've got to get on and deal with it."

Former Treasury chief secretary Liam Byrne, who left a note for his successor David Laws saying there was "no money" left, said almost no country since the 1970s had cut the deficit significantly without increased "inequality".

To laughter, Mr Osborne replied: "You are Labour's man of letters and it's good to see you on the frontbench still.

"Labour had 13 years in government and inequality increased during that time. We will deal with the large budget deficit in a way that is fair and reasonable and protects people across the country."

Later he said Labour had failed to "fix the roof while the sun was shining", adding: "They had 13 years to fix the national finances and now it's up to us to clear up the mess they've left behind."

Karen Lumley (C Redditch) asked if the Government had received any apologies from the previous government for "the mismanagement of the economy" over the last 13 years.

Mr Osborne said: "No but we did receive a letter from Mr Byrne who apologised for the fact there was no money left."

The SDLP's Mark Durkan mocked the Government's efforts to "popularise" its cuts agenda, asking: "How is this axe-factor approach to government going to play out?"

And shadow chancellor Alistair Darling said unemployment now, although high, was half that of the 1980s, the economy was growing and borrowing was coming down because the Labour government had been prepared to "take action to save our economy" going into the recession.

Mr Osborne paid tribute to his predecessor's work. "I thank you for the fact that I inherit from you a far more functional and less chaotic Treasury than the one you inherited from your predecessor (Gordon Brown)."

He said the coalition had inherited an "extremely critical" situation from Labour and ministers were now having to deal with rising unemployment and growing inequality.

"You must have noted how the EU, the G20, the IMF, the OECD and the Governor of the Bank of England have all warned us about the consequences of not dealing early with our budget deficit and not accelerating the reduction in the budget deficit which you proposed in your March Budget", he told Mr Darling.