28 May 2013

Osborne rules out further welfare cuts and tax rises as he targets Whitehall

The Chancellor reveals that he has already secured agreement from seven departments to cuts of up to 10 per cent and makes it clear that he's after more.

By George Eaton

After reports at the weekend that he is struggling to secure agreement from cabinet ministers to any cuts in next month’s Spending Review, George Osborne has taken the unusual step of touring the studios to reveal the progress he’s made so far. On ITV’s Daybreak, he announced that seven departments had “agreed provisionally” to cuts of up to 10 per cent, mentioning Justice, Energy and Communities by name (the others are reported to be the Foreign Office, the Cabinet Office, the Treasury and Northern Ireland). He later added on BBC News that this meant he was now “about 20 per cent of the way there”

Today’s Telegraph reports that Iain Duncan Smith has offered to cut welfare by another £3bn in order to protect spending on defence and the police, but Osborne made it clear that with the Lib Dems opposed to any further welfare cuts, this was not an option. “We’ve already accepted big reductions in welfare, including big reductions for this year, now we’ve got to look for savings in Whitehall, in government, in bureaucracy,” he said. And he made it clear that this would include further cuts to the Home Office and Defence, despite the public protestations of Philip Hammond and Theresa May. While Osborne emphasised that he was “not going to do things that are going to endanger the security of the country, either at home or abroad”, he added, “that doesn’t mean you can’t find savings in the way these big departments operate.” In addition to dampening Tory hopes of further cuts to welfare, Osborne also signalled that had no plans to introduce further tax rises on top of those announced in the Budget. “I am in effect ruling it out, I’m looking for the money from Whitehall”, he said.

Challenged on why he was having a Spending Review at all, when he might not be in government for the period in question (2015-16), Osborne pointed out that “the financial year starts before the general election” and also revealed his underlying political motive. The review, he said, would raise the “very interesting question” of whether Labour “would match these plans”. Should Labour fail to do so, Osborne will accuse them, as the Tories did in 1992, of planning a “tax bombshell” or more of the borrowing “that got us into this mess in the first place”. After the Chancellor’s pre-Spending Review report this morning, that is a dilemma Ed Miliband and Ed Balls will soon to have to confront.