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British government to rush through £6bn of spending cuts

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Chancellor George Osborne

Chancellor George Osborne

Chancellor George Osborne

The British government will rush out £6bn of spending cuts next Monday as it attempts to reduce the UK's record peacetime public deficit of £163bn this year.

David Laws, the Liberal Democrat who is Chief Treasury Secretary, is sharpening the axe even though his party opposed immediate cuts during the election campaign.

His hit-list is expected to include curbs on recruitment; the use of consultants; scaling back quangos; doubling the expected savings on IT projects; scrapping “wasteful projects” like identity cards; cutting the bills from 70 major suppliers and squeezing advertising budgets.

Yesterday Mr Laws argued that the cuts would not reduce the quality of “key” frontline services. At a Press conference, he did not dispute suggestions that the Tory Chancellor George Osborne wanted his Liberal Democrat hand to be “dipped in the blood” of the cuts. However, Mr Laws said the coalition would not be sustainable unless both partners accepted responsibility over its biggest challenge.

Mr Laws revealed that his predecessor, Liam Byrne, had left him a note saying: “Dear Chief Secretary, I'm afraid there is no money. Kind regards — and good luck! Liam.” Later Mr Byrne insisted: “My letter was a joke.”

Asked to explain the Liberal Democrats' U-turn on their election stance that cuts this year

would risk a double-dip recession, Mr Laws said the Bank of England and Treasury believed it would be “safe to make this judgment without risking the economic recovery”.

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Mr Laws revealed that he had already vetoed some cuts proposed by civil servants. “I will reject any proposals which would damage key services or put at risk those on lower incomes,” he said.

The scale of the total cuts will emerge in Mr Osborne's emergency Budget, which he will deliver on June 22. This will reveal the shares of the deficit reduction plan to be met from spending cuts and tax rises. Mr Osborne said the “broad rule of thumb” would be 80% from cuts and 20% from higher taxes — but the Liberal Democrats favoured a bigger share being met from taxes. He said the £6bn cuts would mean saving only £1 in every £100 of public spending, although much deeper cuts will be unveiled this autumn.

Mr Osborne surrendered the Chancellor's power to make forecasts for growth and public borrowing to an independent Office of Budget Responsibility, whose head will be Sir Alan Budd, the Treasury's former chief economic adviser. The Chancellor said: “We need to fix the Budget to fit the figures, not fix the figures to fit the Budget.”

Where the axe may fall

*Quangos: cost of the 766 bodies rose to £46.5bn last year; some could be axed or merged, others face budget squeeze



*Consultants: David Cameron describes the £1.5bn-a-year bill for outside consultants as "outrageous"



*Recruitment: freeze on filling some vacant posts and cutting cost of agency and contract staff could save £1bn-£2bn



*Wasteful projects: both coalition parties believe national identity card scheme should be scrapped



*Computer projects: advisers to Tories while in opposition found that IT savings of £2bn could be achieved



*Suppliers: renegotiating contracts of 70 goods and services suppliers could save up to £3bn, according to Tory advisers



*Advertising: Tories claim Labour used £232m Whitehall budget for party-political purposes; £50m public-health campaigns may be squeezed


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