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Osborne demands more spending cuts

Published 20/05/2015

Chancellor George Osborne is planning to sell off more national assets
Chancellor George Osborne is planning to sell off more national assets

Whitehall departments have been asked to make further cuts this year and plans for the largest sell-off of public assets are being drawn up to help restore Britain's economic fortunes, George Osborne has told business leaders.

The Chancellor wants a second round of Government savings to be made in the coming months as part of his planned spending reduction of £13 billion by 2017/18.

Early action in the new parliament to deal with the country's debts will lead to a "smoother" ride, he told business leaders in London.

Mr Osborne is creating a new Government-owned company to sell off publicly-owned corporate and financial assets this year.

UK Government Investments (UKGI) is expected to carry out deals worth £23 billion in real terms.

The company will be responsible for the sale of shares in Lloyds Banking Group, UK Asset Resolution assets, Eurostar and the pre-2012 income contingent repayment student loan book.

Mr Osborne told the CBI: "If we want a more productive economy, let's get the Government out of the business of owning great chunks of our banking system - and indeed other assets that should be in the private sector. To help that happen, I can tell you that we're merging UK Financial Investments and the Shareholder Executive into one organisation, to return Government investments back to the private sector."

The new Government's Budget on July 8 will seek to fix "long-term weaknesses" in the British economy, including Britain's poor productivity levels and ailing infrastructure, Mr Osborne said.

A "plan to make Britain work better" will be published over the next few weeks, setting out proposals to improve transport, broadband, planning, skills, ownership, childcare, red tape, science and innovation.

British workers' output levels lag behind other leading nations and the issue has become known as the productivity puzzle.

Bank of England governor Mark Carney warned that boosting productivity is " the key determinant of income growth" and "our shared prosperity depends on it".

But Mr Osborne struck an optimistic tone as he insisted it was within the country's grasp to become the "most prosperous country in the world".

He said: "Let me be clear: improving the productivity of our country is the route to raising standards of living for everyone in this country. So by the Budget I will publish our productivity plan, our plan to make Britain work better. Our future prosperity depends on it.

"It is now within our grasp to make Britain the most prosperous country in the world, and the best place to do business.

"It would be very easy at the beginning of a second term to take our foot off the pedal. That's not what we're going to do.

"I want Britain to find that extra gear. So we deliver for working people. And with your help, that's exactly what I intend to do."

Chief Secretary to the Treasury Greg Hands has written to Whitehall departments calling for them to report back with fresh savings plans by Budget day. Protected health, schools and international aid budgets are not affected.

Mr Osborne said: "To provide the best start, our new Chief Secretary Greg Hands is today asking government departments to identify further savings that can be made in this financial year. We've achieved underspends in previous years. We can do so again this year.

" When it comes to saving money, we all know that the more you can do early, the smoother the ride. And without fixing the public finances so our country lives within its means there can be no economic security for businesses or working people."

TUC general secretary Frances O'Grady said: "Productivity has stagnated while George Osborne has been Chancellor - a failure rooted in the weak recovery that he has delivered. It will not be boosted by slashing public investment and removing workers' rights.

"It's no good putting your foot on the pedal if you keep cutting the fuel in the tank. The extreme cuts the Chancellor is planning will put growth at risk during a recovery that is already precarious.

"A firm foundation for higher productivity requires a much better economic plan. We need the Government to invest in skills and infrastructure. Employees should be given a stronger voice at work, rather than removing their protections. And a fairer share of growth must go to wages so that workers have more money to spend."

CBI director general John Cridland said: "Productivity is a missing piece of the growth puzzle and the Chancellor is right to focus on this issue.

"By improving vocational education for 14-18-year-olds, investing more in innovation and upgrading the UK's infrastructure, we can make sure the benefits of growth are felt by all.

"Businesses fully support prioritising deficit reduction, which is critical to maintaining the UK's credibility in international markets and keeping the costs of borrowing low for growing firms."

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