Osborne pledges immediate spending cuts

Friday 15th January 2010

George Osborne has said for the first time that a Conservative government would make reductions to government spending if they win the general election this year.

In a speech delivered last night at the London School of Economics, the shadow chancellor said the size of Britain's deficit necessitated "early-in-year" cuts to current spending plans.

Failure to deal with the burgeoning debt, he said, would undermine international confidence in the country's financial stability and could see the UK losing its valuable triple-A credit rating.

The Tories have already promised a pay freeze for five million public sector workers earning over £18,000, but Mr Osborne said this would not come into effect until 2011. To tackle the country's debt in the 2010-11 fiscal year, Mr Osborne proposed cutting tax credits for those earning over £50,000, and child trust funds for the richest two-thirds of families. This last measure could save the country a reported £300 million.

In addition, Mr Osborne promised a Conservative government would spend less on advertising and consultants, as well as slashing the budgets of "programmes that represent poor value for money".

In contrast, the Labour government has already said it plans to increase spending in 2010-11by £31 billion. Mr Osborne said such plans were "driven by a looming general election and not economic reality". A Conservative government would call an emergency budget within 50 days of a general election, and make radical changes to Labour's current spending plans. "The message could not be clearer," said Mr Osborne, "if you find yourself on the wrong road, you take the first available exit instead of carrying on".

At the start of 2010, the UK was the only top economy still in recession, and each of the three major parties has pledged in recent weeks that they are examining ways to deal with the £178 billion deficit. The country's debt is expected to top 12 per cent of its gross domestic product in 2010.

The Labour party has pledged to halve Britain's deficit over the next four years. Liam Byrne, the chief secretary to the Treasury, said that any speech by Mr Osborne "must be taken with a huge pinch of salt". Instead of helping the UK economy pick up, he said, Conservative spending cuts "would put the recovery in grave danger".

Top Liberal Democrat politicians echoed Mr Byrne's concern. Writing in the Financial Times today, the party's leader Nick Clegg called for an end to political posturing on the deficit, and argued that "the country needs a rational plan. Significant cuts are necessary." His Treasury spokesman, Vince Cable, told the BBC's Today programme that "there's a big risk that if cuts begin suddenly and on a purely political basis that the economy will be plunged back into prolonged recession".

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