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Royal Mail stake to be sold off


George Osborne announced the sale in the Commons

George Osborne announced the sale in the Commons

George Osborne announced the sale in the Commons

The Government's remaining stake in Royal Mail is to be sold off and billions of pounds more trimmed off Whitehall budgets as part of efforts to balance the books, George Osborne has announced.

The Chancellor said he would begin offloading the 30% holding - worth around £1.5 billion - within months.

Meanwhile, departments have found a further £2.5 billion of cuts for this financial year - and are selling off assets worth around another £500 million.

Unveiling the package to MPs, Mr Osborne insisted it showed ministers were "getting on with what we promised".

"When it comes to living within your means, the sooner you start, the smoother the ride," he said.

Treasury aides said the departmental cuts were a "first step" and equivalent to around 3% of spending outside the protected areas of the NHS, schools and international aid.

Cuts will be made to grants to the higher education sector while cash is also being clawed back from local government public health funding.

Heralding the Royal Mail sell-off - two years after the initial flotation - Mr Osborne said: " It is the right thing to do for the Royal Mail, the businesses and families who depend on it - and crucially for the taxpayer."

The Government has appointed Rothschild to advise the Department for Business on the sale of the Royal Mail stake. In 2013 ministers were advised by Goldman Sachs and UBS, and came under fire when the stock price soared.

Treasury aides refused to say whether the shares would be offered to the public, or restricted to institutional investors. However, no shares will be reserved for employees - who received 10% last time.

Shares in the company are down 2.8% today.

Other asset disposals planned by the Government include the Department for Transport selling off shares in land around King's Cross with an estimated value of £345 million.

The details emerged after the respected Institute for Fiscal Studies (IFS) again warned about the difficulty of finding the £13 billion of cuts needed to eradicate the deficit by 2018-19.

The head of the think-tank, Carl Emerson, told a briefing it was "misleading" for David Cameron to imply the process would be "easy" and just meant "saving £1 a year in every £100 that government spends".

"While not inaccurate, these numbers give a misleading impression of what departmental spending in many areas will look like if the manifesto commitment to eliminate the deficit by 2018-19, largely through spending cuts, while not cutting spending in many areas, is to be met," he said.

"Keeping to these, perhaps seemingly benign, spending totals will actually require deep cuts to some areas of government. This is because underlying pressures are increasing spending in other areas.

"Debt interest spending is forecast to rise as both government debt and the effective interest rate on that debt rises. Spending on public service pensions is forecast to rise as the numbers receiving such pensions grows. Spending on state pensions is forecast to rise as average state pension payments continues to rise. In addition commitments to increase spending in some areas, and not to cut other areas, increases the size of the cuts required elsewhere."

The protection being given to the NHS, schools and international aid meant other departments faced 15.3% cuts over the three years between 2015-16 and 2018-19, he said.

Commenting on the Chancellor's announcement of the sell-off of land around the King's Cross area of central London with the aim of raising more than £345 million, Labour London Mayoral hopeful Sadiq Khan said: "London is facing a chronic housing crisis, with land being bought and sold at a premium.

"The Chancellor and the Government should not be making a fast buck out of land they own but handing this over to the people of London so we can build affordable housing to buy and rent for future generations - anything else will be a betrayal of Londoners."

A Department for Business, Innovation and Skills (Bis) spokesman said: " Bis will be making a contribution of £450 million to the overall savings target - around 5% of its non-science resource budget.

"A significant proportion of the savings will be found through surrendering underspends, making efficiencies and reducing lower-value spend. Priority areas for growth and productivity, including the science ring fence and apprenticeships, will be protected."

A Department of Health spokesman said: "The NHS budget will remain protected but difficult decisions need to be made right across Government to reduce the deficit.

"Local authorities have already set an excellent example of how more can be done for less to provide the best value for the taxpayer. A consultation will now be held with them to decide the best way of delivering the savings that need to be made."

Labour demanded more detail from the Chancellor on how the new cuts would affect unprotected spending areas like police, local government and the armed forces.

Shadow chancellor Chris Leslie said: "Nobody disagrees with sensible efficiencies because spending does need to fall in unprotected areas, but why is the Chancellor hiding the detail?

"George Osborne needs to spell out urgently who is paying the price in this chaotic process. This is a shambolic approach to planning public services, ripping up his own 'long-term plan' set out just weeks ago in the March Budget. Savings need to be made through proper reform, not short-term salami-slicing."

TUC general secretary Frances O'Grady said: "The Chancellor failed to meet his deficit targets in the last parliament because he chose cuts over investment for growth, and he's about to make the same mistake again.

"Despite the OECD warning this week that fast cuts are a danger to growth, he's rushing ahead and putting education and innovation in the front line for some of the largest cutbacks."

Paul Raynes, director of policy at manufacturers' organisation EEF, said: "It is vital that the Government should balance the books, and cuts are hugely preferable to tax rises as a way to do that.

"It is equally vital that we improve the productivity of the country and invest in growth. Across-the-board cuts might look like fair pain for all, but the Government should really take a more targeted approach and protect investment in science, innovation and skills, which improve productivity, relative to public service budgets which don't."

Local Government Association chairman David Sparkes said the new cuts amounted to "an opening shot in another war on local government", and would prove a "false economy" by hitting initiatives designed to ease pressure on the NHS by keeping people out of hospitals.

Mr Sparkes told BBC Radio 4's World At One: "The announcement in Parliament of a 5% cut, when it is translated into the real world of local government, is a 7% cut in real terms. And it is also in addition to the 40% cut we have had over the last five years."

IFS programme director Gemma Tetlow said it was "a little odd" for the Chancellor to suggest there were "easy efficiency savings to be found" from local government, some five years into an austerity programme which had cut their budgets by one-fifth.

Ms Tetlow also said that, with asset sales, the Chancellor was "essentially just trading shares for cash, so that doesn't really change the overall financial viability of the Government".

Ukip defence spokesman and MEP Mike Hookem said Mr Osborne's plans would mean a further £500 million cut from military budgets.

"To announce further cuts to the military, while continuing to ring-fence the bloated and wasteful international aid budget, is nothing short of a betrayal of both the armed forces and the security of the UK as a whole. It's utterly disgraceful," said Mr Hookem.

And the chief executive of the UK National Defence Association, Andy Smith, said: "The Chancellor's announcement today that Britain's military will face another £500 million of funding cuts this year, even before we have had the scheduled Defence Review, is an absolute disgrace.

"Conservative MPs should be hanging their heads in shame that a Tory Government is, once again, preparing to cut the armed forces, at a time when threats to UK security are growing and the need for Britain to be militarily strong is greater than ever."

Unions made clear the proposed further sell-off of Royal Mail shares would meet resistance.

Communication Workers Union general secretary Dave Ward said: " The CWU will oppose this final part of the sell-off and continue to campaign against unfair competition and the race to the bottom which privatisation inevitably brings."

Brian Scott, of the Unite union, said: "Selling off the last remnants of the family silver to pay for self-defeating austerity will further undermine the future of the universal postal service.

"It is likely that this will be another mishandled sale and we would urge the Government to think again and retain its stake in Royal Mail."

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