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Queen fails to escape Osborne spending review axe

Chancellor George Osborne set out a four-year plan of cuts today which he said would drag the country "back from the brink".

Unveiling a comprehensive spending review which could result in almost half a million job losses over four years, Mr Osborne said: "Tackling this budget deficit is unavoidable."The chancellor announced that people would have to work longer before they get their state pension.

He said the state pension age for men and women will reach 66 by the year 2020 - four years sooner than previously expected.

He said this would involve a gradual increase in the state pension age from 65 to 66, starting in 2018.

The move would save over £5 billion a year - "money which will be used to provide a more generous basic state pension as we manage demographic pressures", said Mr Osborne.

The Chancellor pointedly observed that Gordon Brown was not in the Commons today.

He said "How ironic that it was the last Labour Prime Minister himself who once observed that the 'public finances must be sustainable over the long term. If they are not then it is the poor ... that will suffer most'."

Mr Osborne added: "That's why we are restoring order to our public finances before that is allowed to happen."

As expePcted he confirmed that spending on the NHS, schools and overseas aid would be ring-fenced.

But he said spending on police would fall by 4% each year.

However, he added: "By cutting costs and scrapping bureaucracy we are saving hundreds of thousands of man hours. Our aim is to avoid any reduction in the visibility and availability of police in our streets."

On the job losses that will result, Mr Osborne confirmed that the Office for Budget Responsibility had estimated that 490,000 could go over the four years.

But he sought to reassure the public, saying: "Much of it will be achieved through natural turnover, by leaving posts unfilled as they become vacant. Estimates suggest a turnover rate of over 8% in the public sector.

"But yes, there will be some redundancies ... that is unavoidable when the country has run out of money.

"We feel responsible for every individual who works for the Government, and we will always do everything we can to help them find alternative work.

"In fact, in the last three months alone the economy created 178,000 jobs."

Mr Osborne indicated that even the Queen was doing her bit.

He said she had agreed to a one year cash freeze in the Civil List for next year.

He added: "Going forward, she has also agreed that total Royal Household spending will fall by 14% in 2012/13 while grants to the Household will be frozen in cash terms."

Main points of Chancellor's Spending Review announced so far.

  • The state pension age for men and women will reach 66 by the year 2020, saving over £5 billion a year by the end of the next Parliament.
  • Proposals will be set out to replace all working-age benefits and tax credits with a single, simple Universal Credit.
  • The Ministry of Defence budget will reach £33.5 billion in 2014/15, a saving of 8%, the Chancellor confirmed.
  • The Home Office budget will find savings of an average of 6% a year, as will the Ministry of Justice's budget.
  • The Law Officers Department will reduce its budget by a total of 24% over the review period, with the Crown Prosecution Service greatly reducing its cost base.
  • Each Government department will next month publish a business plan setting out its reform plans for the next four years.
  • Those on the highest incomes will contribute more towards the fiscal consolidation, not just in cash terms but also as a proportion of their income and consumption of public services combined.
  • Legislation to introduce a permanent tax levy on banks will be published tomorrow.
  • HM Revenue and Customs budget will be expected to find resource savings of 15% through the better use of new technology and greater efficiency, while spending £900 million more on targeting tax evasion and fraud to help collect a missing £7 billion in tax revenues.
  • Capital spending will be £51 billion next year, then £49 billion, then £46 billion and £47 billion in 2014/15, about £2 billion a year higher than set out in the Budget.
  • Total public expenditure will be £702 billion next year, then £713 billion, £724 billion and £740 billion in 2014/15.
  • The Government will deliver £6 billion of Whitehall savings - double the £3 billion promised earlier, said the Chancellor.
  • The best estimate of the reduction in total public sector jobs is the Office for Budget Responsibility forecast of 490,000 over the four years of the spending review period.
  • The core Cabinet Office budget will be reduced by £55 million by 2014/15.
  • The Treasury will see its overall budget reduced by 33% and the department's building will be shared with part of the Cabinet Office.
  • After that, the Royal Household will receive a new sovereign support grant linked to a portion of the revenue of the Crown Estate. Total Royal Household spending will fall by 14% in 2012/13, while grants to the Household will be frozen in cash terms with a temporary additional facility of £1 million to support the costs of the Diamond Jubilee.
  • There will be overall savings in funding to local councils of 7.1%, but ring-fencing of all local government revenue grants will end from April next year, except for simplified schools grants and a public health grant. Local government grant funding for social care to increase by an additional £1 billion by the fourth year of the review and a further £1 billion for social care will come through the NHS to support joint working with councils.
  • Terms for existing social housing tenants and their rent will be unchanged, with new tenants offered intermediate rents at around 80% of the market rent. The Chancellor forecast this would allow the building of up to 150,000 new affordable homes over the next four years.

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