Civil Service: Fears of services being cut in public spending squeeze

Unions and Labour left MPs condemn plan to slash Government expenditure

Britain faces the toughest squeeze on public spending since the Second World War because of the pressure to reduce the country's record borrowing levels.

Alistair Darling pledged to cut this year's borrowing total of £175bn (followed by £173bn in 2010-11) to £97bn in 2013-14.

Hitting the best-off with bigger tax bills will only account for one-third of the savings, with the rest coming from "efficiencies" in public spending and reductions in capital spending projects.

That will translate into real cuts in services, although the most severe effects will be delayed until after the next election. Thus the most difficult decisions on where the axe will fall could be left to a different Chancellor.

There is no prospect of the Government going into any sort of detail of where the pain will be felt until after the election expected in spring 2010. But Mr Darling gave a taste of the problems ahead when he set a target of only increasing public spending by 0.7 per cent in real terms from 2011-12 – little more than half the level being projected just six months ago.

Labour has said it wants to protect front-line spending on health and education, while the Conservatives have guaranteed budgets for health, schools and international development that will not be reduced. With ministers also having to meet huge interest payment bills and pay benefits for steadily-increasing unemployment levels, the reality is that most areas of Government spending will suffer cuts and job losses.

Savings in the work and pensions budget appear implausible given lengthening dole queues and steadily-ageing population. Whichever party wins the election, other big-spending Whitehall departments, including the Home Office, Ministry of Justice and Department for Transport, will feel vulnerable.

It could, for instance, mean major road improvement schemes being ditched, grants to Network Rail cut, the merger of small prisons, the greater use of classroom assistants, and a boost to police efficiency. More cash could be saved if Britain's commitments in Afghanistan are reduced.

Mr Darling yesterday announced plans to make efficiency savings worth £9bn a year by 2013-14 on top of £5bn that had already been identified.

He gave no indications yesterday of where the savings could be found, but a Treasury-commissioned report published on Tuesday suggested annual savings of some £15bn in the Government's budget could be achieved by that date.

It included savings in IT and back office costs of more than £7bn, cuts of £6bn through joint purchasing by departments and £1.5bn by the efficient use of buildings. Cash could also be raised by the controversial sale of a minority stake in Royal Mail, the partial or complete sale of the Royal Mint and heavy cuts to the size of the Land Registry.

Mr Darling said the Government had set "a central goal" of raising up to £16bn from selling property and assets in three years from 2011-12. The money would be channelled into capital projects.

Union leaders protested that the attack on budgets would lead to job losses. Dave Prentis, general secretary of Unison, said: "It's a myth that local government or any other service is stuffed with bureaucrats doing nothing. They have made in excess of 3 per cent efficiency savings called for by the Government over each of the past three years. Studies show you cannot extract any more without damaging services."

Mark Serwotka, general secretary of the Public and Commercial Services union, said: "The efficiency savings announced today, like the others before them, are spending cuts which will result in job cuts and poorer services."

The left-wing Labour MP John McDonnell said: "Buried in this Budget is a programme of expenditure cuts and privatisations never seen before in the history of this country. It means the Government is pressing ahead with the sale of Royal Mail in the face of massive public opposition. This programme of cuts and privatisation will be made worse when the Chancellor's unsustainable growth predictions are exposed.

"Cutting and privatising jobs in the public sector will simply put more people on the dole."

Hit list: Where the axe hovers

Transport

Planned road schemes could be abandoned or contracts renegotiated, and rail subsidies slimmed down.

Home Office

More technology could be used to cut police paperwork and savings made in border controls.

Justice

Jails may be privatised, court fees raised.

Defence

Possible savings on weapons and equipment budgets.

Foreign Office

Embassies' spending could be cut and smaller outposts shut down.

Local Government

Councils could be required to pool to bulk-buy services. Grants could be cut, forcing them to hike council tax rates.

Environment, Food and Rural Affairs

Work on flood and coastal protection may be scaled back.

Culture, Media and Sport

Arts projects' subsidies look vulnerable.

Case Study: 'I'd have liked an increase in Jobseekers' allowance'

Rebecca Middleton, 23 Unemployed graduate

Miss Middleton, graduated in English from Reading University in 2007. She then spent five months travelling around Asia and recently completed a postgraduate course in journalism in London.

"There are some very encouraging schemes in the Chancellor's package. Any extra support for people who have been out of work for a year is good news. The idea of getting under-25s into a job or training with extra money sounds really positive too, especially if it means the Government investing in new industries.

I would have liked to hear about an increase in jobseeker's allowance because at the moment it's impossible to survive on it, especially in London. It feels like a small contribution to income rather than a complete income.

As for taxing the rich so heavily, I think 50 per cent is too much, for two reasons. First, it penalises people for success. Second, it creates a disincentive to wealth creation at a time when we need all the wealth we can get.

I support tax rises on alcohol, tobacco and fuel, because if we have to raise money it's better to tax unhealthy consumption than income."