Leading article: Can they cut without killing the recovery?

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Come Wednesday, the country will finally know what awaits it, when the Chancellor announces the results of the Government's Comprehensive Spending Review. Expectations, it is fair to say, are doom-laden. The extent to which the UK has been living beyond its means is well known and well understood. That at least some of our woes can be laid at the bankers' doors does not alter the reality that almost everyone will take a hit.

Only two departments have been exempted from budget cuts: international development and the NHS. But, as our report today on the NHS shows, overspent primary care trusts are being required to put their houses in order. It has also emerged that the Department for International Development will help out the cash-strapped Foreign Office in some functions. Ring-fencing may not quite be quite what it seems.

The Strategic Defence and Security Review, to be published tomorrow, will provide a foretaste of what is to come. The Government's desire to separate this from the spending review is understandable. The SDSR is about long-term defence thinking as a whole, not just money. But the combination of the financial climate and the timing of the CSR led to complaints from the top brass that, instead of being about defence and security, this review, too, came to focus narrowly on money.

The Defence Secretary, Dr Liam Fox, went into battle very publicly for his department, apparently with some success. A time when Britain has troops on the front line in Afghanistan and the United States harbours doubts about the constancy of even its most loyal ally is not the best time for budget-slashing. It may be that the sort of radical reform that might make defence both leaner and fitter might just have to wait.

If defence is not to lose as much as it feared, other departments will have to make up the difference. Some of the peripheral cost-cutting – the cull of quangos, school building – has already been announced. And while schools generally are now to be protected, universities look set to bear the brunt of education cuts. Lord Browne's go-ahead for a rise in tuition fees may well be matched by a shrinking of government grants for higher education. Together, these measures would amount to a complete restructuring of university finance.

The second most public departmental warrior, after Dr Fox, was the Work and Pensions Secretary, Iain Duncan Smith. He came to office with a thought-through concept for benefits reform, designed to address the twin problems of multi-generational dependency and pockets of acute deprivation. While all ministers have insisted that "fairness" is their guiding principle, it is on the fate and shape of Mr Duncan Smith's proposed reforms that many will judge the validity of that claim.

That the benefits system has not been working well is not in dispute, or that in some cases it has perverse effects. The difficulty is to balance state help for those who genuinely need it, while providing incentives for others to help themselves – which will also cost money. Mr Duncan Smith wants to get many more people into work, at a time when new jobs are few and far between. On the other hand, it has been said that a crisis provides opportunities to do things you couldn't do before.

What happens to benefits underlines the delicacy of the whole exercise. It is not just that one person's fairness is another's glaring injustice. It is that with the economy so finely poised between recession and recovery, the Government must not do anything that would jeopardise still hesitant growth. With reports that even the Treasury was getting nervous about the Government's zeal for cutting, we await Wednesday's review with trepidation – but also with the faint hope that the Coalition will show that two heads are better than one, in budgetary matters, as in much else.

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