The Axe Factor – George Osborne wants public to join cuts challenge

Published on Tuesday 8 June 2010 22:44

CHANCELLOR George Osborne yesterday called on the country to tell the government where the axe should fall in what he described as the "national challenge of our generation" in delivering massive cuts to public spending.

• George Osborne: Open to suggestions on where to make cuts. Picture: Getty

The appeal came as sterling fell on a warning from credit ratings agency Fitch over the urgency of reducing the UK's deficit, while opponents branded the government policy as the political "Axe Factor".

Announcing the comprehensive spending review for the next four years which will report in the autumn, Mr Osborne unveiled his blueprint for cuts with details of how the government will work on slashing its departmental budgets.

His words calling for the country to pull together on the cuts echoed the Tory election message of "we're all in this together" and Prime Minister David Cameron's "Big Society", where he envisaged the key decisions being made by ordinary people across the country.

With strife spreading across Europe, including strikes in Spain yesterday following unrest in Greece and threats of mass protests in Italy and Spain, the new Tory/Lib Dem coalition is desperate to create a consensus for the savage cost-cutting to come.

Mr Osborne suggested that these cuts could eventually unite the country and he said he wanted the best minds – including trade unions, political parties across the spectrum, councils and the public and private sector – to work on finding the savings needed to reduce the deficit.

But just as the new government was trying persuade the nation that it did not intend to repeat the mistakes of past austerity governments, Mr Cameron publicly welcomed Margaret Thatcher to Downing Street for tea. It was an image which was picked up by the unions, who made it clear that they do not intend to co-operate with the cuts agenda.

The TUC's general secretary, Brendan Barber, yesterday rejected the claims that if the deficit is not tackled it would lead to 70 billion of interest payments a year and said that slashing public services was not the way to do it. He raised the fear that the UK government will now follow the example of Canada and top slice public spending by 20 per cent.

"The Chancellor's speech looks to be far more about politics than economics – not so much deficit reduction as a bold attempt to shrink the state and undermine public services," he said.

"It is clear that the coalition wants to go far beyond efficiency savings and cuts in intrusive state activities such as ID cards. The result will be higher unemployment, cuts in support and help for not just the poor and vulnerable, but the services on which middle-income Britain depends.

"And far from helping the private sector, whole sectors such as construction that depend on public procurement for much of their work will be badly hit."

But Mr Osborne said slashing billions of pounds off spending was a necessary "national challenge" as he outlined the government's approach to the looming Comprehensive Spending Review.

A series of consultations will be held so the "brightest and best" from society, business and charities can provide ideas on reshaping provision of services to reduce costs.

Ministers will also be forced to justify every item of departmental expenditure before a "Star Chamber" of senior colleagues – with initial plans due to be presented by the end of next month. Mr Osborne insisted: "We are going to have a more collegiate approach.

"We are genuinely seeking to engage as many people as possible, the brightest civil servants across all the government departments, the best people from the devolved administrations, the best people from pressure groups, independent think-tanks and the frontline public services."

He said that in previous spending reviews conducted by former prime minister Tony Blair and former chancellor Gordon Brown, every secretary of state was handed "a number in an envelope before it was announced to the press about 20 minutes later".

The Chancellor told MPs that the UK needed to learn from Canada's experience tackling a massive budget deficit in the 1990s.

Mr Osborne said the new Office for Budgetary Responsibility would produce its first independent assessment of "the growth forecast and other forecasts" next Monday – ahead of his first Budget on 22 June.

The new Star Chamber will be chaired by the Chancellor and Chief Secretary Danny Alexander.

Other Cabinet ministers will be considered for membership of the committee once they have agreed their budgets – providing an "incentive" for them to compromise and settle quickly.

According to officials, a similar committee did exist under the Labour government, but it met "relatively infrequently".

But shadow chancellor Alistair Darling said there did not "seem to be very much substance" in the announcement.

Mr Darling rejected the Chancellor's attempt to blame the previous administration for the country's financial woes, saying unemployment was half that of the 1980s and repossessions were half those of the 1990s recession.

"The reason our economy is growing and the reason our borrowing is coming down is because we in common with other countries, as part of an international consensus, were prepared to take action to save our economy going into recession – and every single one of those measures was opposed by him when he was shadow chancellor," Mr Darling added.

However, the Lib Dems and Tories hit back claiming that the Labour Party was the only party "not to understand the financial crisis".

And Mr Darling was further undermined by his former colleague and ex-banking minister Lord Myners' admission that Labour had got it wrong in parliament.

During a debate in the Lords, he slammed his own Labour colleagues, saying:

"There is nothing progressive about a government that consistently spends more than it can raise in taxation and certainly nothing progressive that endows generations to come with the liabilities incurred with respect to the current generation."