Everything on the table as government slashers sharpen their knives

AS THE great "not-in-my-backyard" spending review approaches, there has been a dawning realisation that the coalition's axe really could hurt.

The revelation that child benefit for higher-rate taxpayers was among the government's targets finally punctured the confidence of those happy to swallow the government's line that widespread cuts are needed - regardless of the dire economic consequences that will inevitably follow - on the assumption that they would somehow escape the wildly swinging axe.

Hack away at benefits for the vulnerable for all you like, said the Nimby deficit hawks, happy to sit back as jobs are slashed, homes lost and lives ruined. But that acceptance is eroding, as the reality of both the cuts and the likely dire consequences for a fragile economy begins to dawn.

There are two reasons for this, and two obvious responses. Firstly, the measures announced already offer a clue as to what's considered fair game by the slashers. And it seems everything is on the table.

It may prove that some of the most damaging cuts are among those already set out. The inflation update this week drove home the damaging implications of the move from the retail prices index (RPI) to the lower consumer prices index (CPI) measure of inflation in calculating pension and benefits payments.

The annual increase is based on the September level, which means that some pension payments will rise next year by last month's CPI rate of 3.1 per cent, instead of the RPI rate of 4.6 per cent. If the lower CPI figure was taking effect for state pensions from next April - instead of 2012 - the rise would be 1.50 a week lower, or 2.30 a week less for couples.

This takes us to the second reason - that the Prime Minister's pre-election promises were made only for breaking. David Cameron had several read-my-lips moments in the pre-election debates, and it becomes clearer by the day that we underestimated his ventriloquism skills. Take his launch of the "pensioner pledge", for example, when he accused Labour of scaring pensioners by claiming the Conservatives were going to cut the winter fuel allowance, cut pension credit and end free bus travel and TV licences for over-75s. "You must not believe them," said Cameron. "I can promise you - these are lies, lies, lies. You have my word. If we win the election, we will protect all of these things."

It'll be worth digging this out again next week, just to see how many more promises the government has broken less than six months into its administration. The universal winter fuel allowance of 250 is in its targets, as is the 25-a-week cold weather payment, given when the temperature drops below freezing for seven consecutive days.

Whatever happens, there are two ways of responding. The first is to take the ostrich approach. The second is to take control.That means those struggling with debts must seek advice now, before Citizens Advice and other sources of free help are even more inundated. It also means boosting savings; not paying more tax than necessary by taking advantage of Isas, pensions and other tax allowances; and being vigilant over what you're being charged on investments. It means taking time to understand what you've got coming in and going out and taking steps to keep the balance as positive as possible, because, more than ever, the government is not going to help you if you encounter difficulties.