35 days and counting – George Osborne puts the UK on austerity alert

Published on Monday 17 May 2010 23:21

THE countdown to "austerity day" began yesterday as new Chancellor George Osborne revealed an emergency Budget will be published on 22 June.

• Chancellor George Osborne faced the media, alongside Lib Dem Treasury Chief Secretary David Laws, as he announced the date for the emergency Budget. Picture: PA

The spending review will unveil 6 billion of cuts, although Mr Osborne promised to protect "key", although not "all", frontline services.

And while he confirmed the promise that devolved budgets would be protected until next year, opposition parties warned that this would mean Scotland would be "hit by a double whammy" in 2011.

Scottish Labour MPs privately suggested that the cuts would be designed to avoid an impact until after the Holyrood election in May next year.

Meanwhile, there are growing concerns raised that the new Con/Lib government is preparing to halt the building of a second aircraft carrier.

If this were to happen, the future of shipbuilding in the Clyde and Rosyth would come under serious threat.

Facing the media in his first official press conference as Chancellor yesterday, Mr Osborne claimed that the finances were in a far worse state than had first been feared. He accused Treasury officials of colluding with Labour ministers to "cook the books" over the state of the economy with over-optimistic growth forecasts.

And he announced that he would create a new Office for Budget Responsibility to be headed by former Treasury chief economist Sir Alan Budd, which would make future economic forecasts, removing the political interference from the process.

Mr Osborne said that tackling the deficit was the "most urgent issue" facing the Lib-Con coalition. He warned that failure to get to grips with the problem could lead to the sort of problems now afflicting Greece.

"Greece is a reminder of what happens when governments lack the willingness to act decisively and quickly, and when problems are swept under the carpet," he said. "If we fail to tackle the deficit we inherited from the previous government, the consequences could be disastrous."

David Laws, the Liberal Democrat Treasury Chief Secretary, accepted both parties in the coalition would have "hands stained with blood" as a result of the cuts, but it had to be done for the good of the country.

He added that they were "united in our resolve to deal urgently and decisively with the unacceptable state of our public finances".

But former Labour chancellor Alistair Darling accused the two men of taking a leaf out of Yes, Prime Minister and "playing the oldest trick in the book" to justify harsher cutbacks.

He said: "The suggestion that Treasury civil servants have colluded in publishing anything other than accurate figures is just plain wrong.

"Far from being over-optimistic, the ONS public finance figures published in April showed that borrowing last year was actually lower than forecast in the Budget."

There were questions about why Mr Osborne was "seeking" areas to make 6bn cuts to stop the proposed increase in National Insurance contributions, when just a few weeks ago during the election he claimed to have "identified" them.

Neither minister would be drawn on whether there would be a rise in VAT, although they admitted that capital gains tax would go up.

This led to an attack by former Scottish secretary Lord Forsyth, whose paper calling for capital gains tax to be abolished for many people had previously been accepted by Mr Osborne.

Lord Forsyth suggested that the acceptance of a Lib Dem proposal would be an "attack on the middle classes" and investments they had made for their pensions.

But in Scotland there were concerns about the impact of a double hit, when this year's cuts are added to next year's for the 2011-12 Scottish budget. SNP Treasury spokesman Stewart Hosie, MP, said: "A double whammy from the Tory-Liberal cuts coalition will only endanger Scotland's fragile economic recovery further."

Meanwhile, with health, education and international development budgets all secure, there were fears that potential defence cuts could see the second carrier, the Prince of Wales, cancelled. It is believed that too much work has been carried out on the first carrier, the Queen Elizabeth, for it to be cancelled.

Glasgow South West MP Ian Davidson said he would be "seeking assurances about the carriers".

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