CSR: Osborne unveils radical cuts but looks to sweeten the pill

CHANCELLOR George Osborne today unveiled the biggest programme of public sector cuts seen in this country in a generation.

With health spending deemed untouchable – it was the welfare budget – cut by £7bn –  which bore the brunt of the £83bn worth of cuts, which Mr Osborne confirmed will lead to nearly 490,000 public sector job losses over the next four years.

In what was undoubtedly the biggest economic and political balancing test of George Osborne’s brief career in Government, the Chancellor said his statement was focused on ‘reform and fairness’ and bringing the economy ‘back from the brink.’

Labour and trade unions reacted angrily, claiming the cuts were too deep and would plunge the economy back into recession.

Mr Osborne pledged more action on banks’ profits – with legislation for a new permanent levy coming before the House of Commons tomorrow, to ensure they take their share of the pain.

Public investment, the Chancellor pledged, would remain, but in areas with strong growth prospects – transport, the green economy, scientific research and education.

To make: “Britain a leader of the new green economy”, Mr Osborne said £1bn would be invested in a carbon capture project, £200m in offshore wind farms and £1bn would be put into the promised green investment bank.

Key transport schemes will get the go-ahead, including expansion of the M62,  electricification of rail between Manchester, Liverpool, Preston and Blackpool and a revamp for Birmingham New Street.
The new Mersey suspension bridge will also go-ahead, the Chancellor said,

Among the many welfare reforms was a hike in the retirement age. The state pension age will reach 66 by 2020, saving more than  £5bn a year by the end of the next Parliament.

He said in his speech, which lasted one hour and three minutes, that a war on waste in Whitehall would generate £6bn in savings – double original forecasts.

Chris Humphreys, a partner at PKF (UK) LLP (PKF), in Sheffield said: “UK plc is highly geared – we’re paying £44bn in interest a year – and so something needed to be done to tackle this number. There are two ways of doing it – cut spending or raise income. By electing this Government we have chosed the first option.

“We knew the cuts were coming, the only issue is the scale and the severity of them. The devil is always in the detail andc it may be some time before we are able to interpret the full impact.

“I think there has to be concern in areas like South Yorkshire about whether the private sector is ready to pick up the baton in terms of job creation, if so many public sector jobs are being cut.”

Key announcements by department:

Communities and Local Government- annual budget: £33.6bn, cut of 7.1%
Culture, Media and Sport – annual budget: £2bn,  19 quangos to go. 15% cuts in core programmes but free museum entry to remain. BBC licence fee to be frozen for next six years – equivalent to 16% savings over the period.
Defence- annual budget: £46.1bn, Cut of  8% cut over four years
Energy and Climate Change – annual budget: £3.1bn, cut by 5%
Environment, Food and Rural Affairs – annual budget: £2.9bn – reduction by 8%
Foreign Office – budget £2.2bn – 24% cut in funding over four years.
Health – annual budget: £106.4bn – spending to rise.
Home Office – budget: £10.2bn – 6% cut