Fears about the extent of the public sector cuts.

Tough cuts to come after May

Published:  25 March, 2010

LONDON: Chancellor Alistair Darling delivered a firm Budget warning, vowing the 'toughest for decades' spending cuts after the General Election, writes Mark Conrad.

Mr Darling's final Budget before the forthcoming General Election in May did reveal that the UK's precarious financial position is not quite as bad as feared.

He announced the Budget deficit – which has led to widespread fears about the extent of the public sector cuts – had gone down from a forecast £178bn to £163bn, partially fuelled by higher-than-expected tax and VAT revenues.

While that still represents a record level of borrowing, Mr Darling's latest figures perhaps reflect the fact that the UK is beginning, albeit slowly, to emerge from its biggest downturn since World War II.

However, the extent of the economic recovery remains fragile, Mr Darling revealed, and he promptly reduced his UK growth forecast for 2011 to 3.5%.

As expected, the Chancellor provided little detail on Labour's plan to slash public spending beyond the general election, choosing to focus instead on key 'gains', such as plans to protect adult social care spending by maintaining inheritance tax.

While Mr Darling promised to maintain a high level of public spending, his Treasury team acknowledge that post-election cuts are inevitable – and he outlined a £20bn package of savings and cuts that would help him achieve lower borrowing rates.

Mr Darling published details of how Whitehall departments would make the £11bn of new efficiency savings that were outlined in his Pre-Budget Report last year, and revealed that pay and pension restraint in the public sector would help to contribute a further £4bn to his savings plan.

In a passing reference to the inevitable cuts, he said a further £5bn would be saved from 'scaling back' on spending.

To boost local regeneration programmes and sustain the fragile recovery across local economies, Mr Darling also revealed that he would cut business rates for one year from October – meaning councils would have to pool less from small and medium enterprises.

Other local spending commitments included an extra £100m for local authorities to tackle the UK's pothole crisis, while proceeds from the sale of a large range of public assets – including the Tote and the Dartford Crossing – could also affect local economies.

Conservative opposition MPs said Mr Darling's cuts did not go fast or deep enough to tackle the UK's debt problem effectively. But Mr Darling warned that to cut faster and deeper 'would be wrong and dangerous' as it would undermine the fragile recovery across national and local economies.

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