Fishburn Hedges

24.05.2010

Today’s announcement on public spending seemed to promise the impossible – deep, sharp and swift cuts that are drastic enough to make a difference to the deficit and keep the City happy, but without hurting that much.

All in all a total of £6.25 billion worth of savings have been ‘discovered’ by the new administration after just 13 days in office, with the majority coming from cuts in departmental spending. According to the announcement, UK citizens will not notice a difference in frontline services or the quality of delivery.

Somewhat surprisingly, Osborne also promised to protect schools, Sure Start centres, and education for 16-19 year olds. Savings from the health, defence and international development departments will also be reinvested into their frontlines. So where will the money come from?

Mostly, the axe has fallen on the back office and anything that could be viewed as an ‘extra’, including consultancy and travel costs (£1 billion), IT, suppliers and property (£2 billion), freezing recruitment and cutting the size and number of quangos, such as regional development agencies (£700 million), and low value spending (£500 million). The Child Trust Fund programme will also be cut – a key Liberal Democrat election promise. There is even a pledge that MPs and senior civil servants will be forced to walk or travel on public transport rather than use government cars. So far, so relatively uncontroversial. Quangos are an easy target, and the sight of MPs on buses would please most voters after the expenses scandal.

In this respect, then, Osborne and his sidekick Laws have taken the path of least resistance for this first round of cuts. There were always going to be ruffled feathers – a freeze on civil service recruitment and a cut in quangos will result in job losses, which the unions are already up in arms about. Bob Crow of the RMT has said that “today is just the opening shot in a cuts and austerity war that could ram a gaping hole in the UK's public services and jack up mass unemployment to Thatcherite levels and beyond.”

In the main, however, Osborne and Laws have pitched their initial cuts programme so that it offends the least number of people but still looks like a serious effort. The City, so far, looks to have bought it, with no major fluctuations in the pound. The CBI is encouraged that “the Treasury has managed to find slightly bigger savings than first expected.” It’s worth remembering, though, that today’s cuts are just the first round of many to come. If the Treasury is going to achieve the next £40 or £50bn cuts necessary by 2011, far harsher measures will be coming in the June 22 budget and October’s Comprehensive Spending Review.

There is one more thing to be said about today’s announcement – what it shows us about the Tory-Lib Dem relationship. Osborne lobbied for Laws to be his Chief Secretary, and for good reason – he is the most right-wing Lib Dem in the cabinet. Thus, while keeping in line with the display of bipartisanship, Osborne has ensured that there will be little dissent in such a key department.

Addressing the deficit early was a key part of the Tory manifesto, while the Lib Dems were far more reluctant to cut immediately. However, it now seems as though the Lib Dems have signed up wholesale to the Tories’ economic agenda. The question is whether this kindly compromise will stand through the tougher cuts to come.

Posted by Joanna Heath