Budget: Tough time for public services
GEORGE OSBORNE said public spending cuts would comprise 77% of his first Budget’s attempt to tackle the deficit, and promptly froze public sector pay for the next two years.
With protection for the NHS and the armed forces, public spending across the remaining government departments will have to be slashed by 25% over the next four years to help cut public borrowing from 10.1% of GDP to a little over 1% in the same period.
And, announcing a commission to be headed up by former Labour minister John Hutton to look at pensions, he further signalled that public servants could expect a harder ride in years to come. Private sector employees, he said, had experienced years of frozen pay and job losses while the public sector had been largely insulated from economic reality.
Sweetening the pill with a promise to give more lower paid workers a £250 annual increase, he also warned senior managers to tighten their belts, with a cap on their salaries at no more than 20 times the pay of the lowest earners in the sector. Economist Will Hutton has been tasked with finding out how to deliver that policy.
Similarly, the move on pensions will have to wait for the other Hutton report. Mr 
Osborne said: “We will be spending over £10bn a year simply to meet the gap between pension contributions and payments to the unfunded pensions they support.”
John Hutton will provide an interim report in September in time for the Autumn Spending Review, and a full report in time for next year’s Budget.
Welfare, one of the largest bills faced by Government is attacked in a range of measures which include a freeze – but not scrapping – of child benefit, restrictions on housing benefit and more stringent tests for Disabled Living Allowance. In all, the shake up of the welfare system will save £11bn, the Chancellor said.
