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U.K. Ministers Are Told to Plan for 40% Spending Cuts

05 July 2010 11:05 (UTC +04:00)

Baku - APA-Economics. U.K. government departments have been told to plan for spending cuts of as much as 40 percent as Chancellor of the Exchequer George Osborne seeks to narrow a record budget deficit.

The Treasury has ordered most ministers to draw up scenarios for spending reductions of both 25 percent, the average figure specified by Osborne in last monthâ€™s budget, and 40 percent over four years, Transport Secretary Philip Hammond said on BBC 1 televisionâ€™s â€œAndrew Marr Showâ€ yesterday.

Prime Minister David Cameronâ€™s coalition of Conservatives and Liberal Democrats is proposing expenditure cuts and tax increases totaling 113 billion pounds ($172 billion) to slash a deficit of 11 percent of economic output. Osborne is due to set budgets for each department in a spending review in October once ministers have made their own proposals.

Education Secretary Michael Gove will today announce a reduction of as much as 3.5 million pounds in the schools budget, the Guardian newspaper reported. That will mean freezing plans to rebuild about 700 schools, the newspaper said.

Under the Treasury plans, Gove and Defense Secretary Liam Fox have both been asked to prepare proposals for budget cuts of 10 percent and 20 percent. The only departments exempted are health and international development.

Business Secretary Vince Cableâ€™s department will have to set out how it can reduce its spending to as little as 11.5 billion pounds by 2015 from 19.2 billion pounds in the current fiscal year. Goveâ€™s officials will need to draw up a blueprint to cut the education budget to 40.7 billion pounds from 50.9 billion pounds.

The Institute for Fiscal Studies, a London-based independent research group, said the cuts to public spending would be the deepest since World War II and some departments would face reductions of a third. There will be 610,000 jobs cut in the public sector over the next five years as the spending squeeze is implemented, the governmentâ€™s new Office for Budget Responsibility said last week.

Ministers will meet civil-service union officials today to discuss possible changes to the compensation terms for those who lose their jobs, the BBC reported.