Page last updated at 19:53 GMT, Monday, 24 May 2010 20:53 UK

George Osborne outlines detail of 6.2bn spending cuts

Chancellor George Osborne outlined plans to cut ''wasteful'' spending

Chancellor George Osborne has outlined plans to cut £6.2bn of what he calls "wasteful spending" to start to reduce the budget deficit.

There will be cuts to quangos, spending on consultancy and big IT projects and a civil service recruitment freeze.

Child Trust Funds will be axed by January but funding for schools and Sure Start will be protected, he said.

Shadow Chancellor Alistair Darling said Mr Osborne must "come clean" on the details and how many jobs were at risk.

Of the cuts identified, £500m is to be reinvested in further education, apprenticeships and social housing, leaving a net spending cut of £5.7bn - less than 1% of total government spending.

The savings, according to the government, will break down as:

  • £1.15bn in "discretionary areas" like consultancy and travel costs, £95m through savings in IT spending, £1.7bn through delaying/stopping contracts and projects and renegotiating with suppliers
  • £170m from reducing property costs, at least £120m from a civil service recruitment freeze and £600m from reducing quango costs and £520m from other "lower value" spend
  • The biggest cuts by department are £683m (4.6% of departmental budget) at Transport, £780m (7.2%) at Communities and Local Government, £836m (3.8%) at Business, £670m (1.1%) at Education and £325m (3.2%) Department for Justice
  • The devolved administrations in Scotland, Wales and Northern Ireland would have to save £704m - although they would have the option of deferring savings until the following year
  • And local authorities - which will be expected to save £1.165bn - will be given more "flexibility" to find savings as "ring-fences" around government grants are being removed.

Most of the money saved this year will be used to reduce the deficit - which was £156bn in 2009/10. Next year the savings will offset the decision not to bring in the full National Insurance rise Labour planned for April 2011.

Chief secretary to the Treasury David Laws said Child Trust Fund payments would be axed by January.

He said halting these £250 payments to newborns from the end of the year - and the £250 top-up payments at age seven from August - would save £320m during the current year.

The years of public sector plenty are over, but the more decisively we act the quicker and stronger we can come through these tough times
David Laws
Chief Secretary to the Treasury

He said Child Trust Fund money which would have gone to disabled children would instead be used to provide respite care - amounting to 8,000 week-long breaks for severely disabled children.

The coalition government also plans to save £320m by ending "ineffective elements of employment programmes" - including the Future Jobs Fund which aims to provide work or training places for 18 to 24-year-olds who have been out of work for a year.

And extra university places and schools services in England are to be cut - Labour had promised an extra 20,000 university places but this has been cut to 10,000.

Mr Osborne and Mr Laws did not say how many public sector jobs were expected to go - but said the bulk would come from not filling posts as people left them.

Public servants will be stopped from travelling first class and ministers from having a dedicated car and driver - instead they will be expected to walk, use public transport or pooled cars.

Mr Laws said the cuts were designed to send a "shockwave" through government departments and discourage waste but he said they would protect "as far as is possible" key front line services and protect those on the "lowest incomes".

'Protect jobs'

He will chair an "efficiency and reform group" with Cabinet Office Minister Francis Maude to help push through the savings.

Mr Laws said: "The years of public sector plenty are over, but the more decisively we act the quicker and stronger we can come through these tough times.

This is not a common-or-garden Whitehall pruning exercise. It is the first round in what is going to be a long - and painful - game
Stephanie Flanders
BBC economics editor

"We also promise to cut with care, we are going to be a progressive government even in these tough times."

Chancellor Mr Osborne argued that unless the government tackled huge public debt, it could derail the economic recovery.

"We need to take urgent action to keep our interest rates lower for longer, to boost confidence in the economy, and protect jobs to show the world we can live within our means.

"We need to tackle the deficit so that our debt repayments don't spiral out of control. And the more we do now the more we can spend on the things that really matter in the years ahead."

'Very disappointed'

The announcement is the first step in the coalition government's attempt to eliminate the bulk of the UK's budget deficit over the next five years.

But the respected Institute for Fiscal Studies said it amounted to less than a tenth of the "fiscal repair job" needed over the period on the basis of assumptions in Labour's last Budget in March.

The announcement proceeds the government's emergency Budget on 22 June, its autumn review of long-term departmental spending and an audit of all spending commitments approved since the start of 2010.

Mr Laws acknowledged there would be "even tougher decisions" ahead adding: "This is only the first step on what will be a long road to restore good management to our public finances."

This is the first big mistake made by this government on the economy
Ed Balls, Shadow Education Secretary

During the election, the Lib Dems and Conservatives disagreed over the need for cuts this year but those differences were put aside as both sides made compromises in their coalition deal.

Becta, the government's technology agency for schools which employs 240 staff in Coventry, has been abolished.

Its chairman Graham Badman, and chief executive, Stephen Crowne, said they were "very disappointed" and said the agency saved schools and colleges "many more times" more money than Becta cost to run.

Scottish Finance Secretary John Swinney said Scotland would put off its £332m share of the savings until next year, arguing that to do so this year risked "undermining the recovery" and because Holyrood had already approved its budget for 2010/11.

Wales' First Minister Carwyn Jones has previously welcomed the "flexibility" to postpone cuts. Both had predicted cuts would be higher in Scotland and Wales.

Shadow Chancellor Alistair Darling told the BBC there was a lack of detail: "There could be thousands of jobs affected by this, there could be measures that could damage growth. I would be very, very concerned about that."

'Greater savings'

Shadow Education Secretary Ed Balls, one of those running for the Labour leadership, said it was a "complete fantasy" to suggest the measures would not result in job losses, describing the announcement as the "first big mistake made by this government on the economy".

And union leaders described the plans as "deeply worrying".

"With the UK economy and the economies of our trading partners in Europe so fragile, this is not the right time to be cutting back," Brendan Barber, TUC general secretary, said.

But employers' group, the CBI, said it was "encouraged" by the steps being taken, saying they were a "painful but necessary" move in showing the UK was serious about tackling its borrowing levels.

Dame Margaret Eaton, chairman of the Local Government Association, said: "If there are tough decisions to make, they are best taken by the people who know their area best, so it is good the Government is giving councils more freedom over spending and starting the business of cutting the quango state down to size."

Breakdown of cuts

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