Chancellor George Osborne has faced a chorus of voices in the run up to tomorrow’s spending review calling for him to “stay the course” by restraining government spending.
The TaxPayers’ Alliance, Institute of Directors and Institute of Economic Affairs urged fiscal restraint in the forthcoming review, while the TUC called for extra investment in education and other services.
It was crucial Osborne reduced spending at this early stage in the Parliament, the TaxPayers' Alliance (TPA) said.
“Rather than give in to misguided calls to ease up on spending restraint, the chancellor must use this week's spending review to stay the course on deficit reduction,” said the TPA.
This would mean sticking to pre-election projections of public spending falling to 36.3 per cent of GDP by the end of the Parliament, it added.
The organisation warned that any deviation from these figures by Osborne would represent “a failure to match his words with sufficient action”. Seven months into this financial year the government had borrowed £54 billion, adding to the £1.5 trillion to the national debt, it said.
The Institute of Directors (IoD) said it was vital that Osborne “hold his nerve” on deficit reduction and said 85 per cent of its members were in favour of the chancellor converting the budget deficit into a surplus by the end of this parliamentary term.
Simon Walker, director general of the IoD, said: “The chancellor is under immense pressure to loosen the purse strings, but he must hold his nerve.”
Rather than going on a “spending spree” the chancellor ought to use this review to spell out when he will deliver promised tax cuts, the IoD said.
Meanwhile the Institute of Economic Affairs (IEA) said it was ironic that the review would probably be greeted with “talk of savage cuts” in areas such as the police and local government when most spending had been ring-fenced and “the welfare state continues to grow”.
According to the IEA, Osborne has protected spending on pensioners, the NHS, international aid, defence, funding for schools, and debt interest, while setting arbitrary targets for other departments.
“The traditional parts of government – law and order, justice and local government – are not ring-fenced and are likely to continue to face significant cuts in order to broadly protect the welfare state,” it said.
The TUC, however, called for a substantial boost to government infrastructure funding along with extra investment in adult skills and further education. It said employment rights such as redundancy payments and sick pay must be protected in the public sector, while investment in services like transport, health, and education should grow.
TUC general secretary Frances O’Grady said: “The spending review needs to focus on a bigger economy, not a smaller state. It’s a chance to set out a clear vision, backed by a proper investment plan, to make the UK a global leader with the best infrastructure and the best jobs.”