Coalition makes first moves to tackle budget deficit

17 May 2010

17 May 2010 | Lindsay Clark

The Conservative/Lib Dem coalition government has begun work on £6 billion of spending cuts, as set out in the Tory party’s pre-election commitment, to reduce the £163 billion budget deficit.  

A statement from the Treasury today said the UK government would “re-examine all spending approvals made since 1 January, to ensure they are consistent with the government’s priorities and good value for money”. There are no details yet on what the analysis will cover.

Procurement experts previously told SM that EU procurement law could limit the scope for reducing spending under large existing contracts. Sufficient changes to any contract could mean that it should be re-tendered, they pointed out.

Chancellor George Osborne and the Treasury’s chief secretary David Laws said the Treasury and the Bank of England have confirmed the feasibility and advisability of beginning to tackle the country’s deficit this year - and the economic case for doing so.

Osborne said work had already been undertaken on where the cuts would fall and how they would be delivered. Over the next week Laws will meet with ministers to agree how their departments will contribute. These contributions will be set out next Monday.

“The Chancellor and I are united in our resolve to deal urgently and decisively with the unacceptable state of our public finances,” Laws said. “It is both possible and necessary to start taking action this year. By making an early down payment we are not only helping to reduce the deficit faster, we’re sending a clear and strong message that we intend to do what’s needed to repair our public finances and get our economy moving again. We can make these cuts while protecting the quality of key frontline services.”

Meanwhile, the new government has created an independent Office for Budget Responsibility (OBR), which will reveal an emergency budget on 22 June. As well as creating independent economic growth forecasts, the OBR will make an independent assessment of the public finances and the economy.

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