Spending cuts 'deliverable', says George Osborne

Media caption,
Osborne: 'I required departments to reduce administrative budgets by a third'

George Osborne has hit back at claims by a group of MPs that the government's spending cuts are not deliverable.

The chancellor said the cuts would be a "challenge" but would be achieved through greater transparency and accountability.

The "shockingly poor" quality of financial data would also be improved.

The Commons Public Accounts Committee found only £15bn of a three-year £35bn savings programme outlined in 2007 had been achieved by 2009.

This left MPs "gravely concerned" about the possibility of making the larger reductions demanded in the recent Spending Review, its report added.

'Nation of auditors'

Mr Osborne said he would succeed where the previous government had apparently failed because, unlike Labour, he had "not set some great big efficiency target and just assumed government departments can deliver on it".

Instead, he had been more "specific" about what should be cut and given more control to departments over how to do it - and introduced greater transparency so that the public could scrutinise how their money was being spent, creating what he called a "nation of auditors".

The government was also taking steps to improve financial management in Whitehall and the quality of spending data, which he said the committee's report has identified as one of the reasons why Labour had failed to meet its efficiency targets.

Unlike Labour, he said he had also cut individual departments' administrative budgets "by at least a third" and had taken other concrete actions, such as "eliminating" some quangos.

"I am actually cutting the budgets for these departments, so the challenge for them will be, yes, to deliver that through greater efficiency, greater productivity gain, and the Treasury, the centre of government, will remain absolutely on the case to deliver those productivity improvements," he told the Commons Treasury committee.

He conceded the spending cuts were a "big task" but he claimed there was "capacity" in the system as it came after a period of prolonged expansion in the public sector.

"We are dealing with a situation where there has been no attempt to control public expenditure," he told the committee.

He also claimed whoever had won the general election would have had to take similar action - and he said there was evidence that Labour had been planning a cap on housing benefit and an increase in VAT, two policies for which he is now most attacked by his political opponents, he told the MPs.

Mr Osborne also used his appearance before the committee to announce that the 2011 Budget will be held on Tuesday, 23 March,

At last month's Spending Review, Mr Osborne outlined the details of £81bn of cuts to public expenditure over the next four years.

He argued they were necessary to reduce the deficit and stabilise the economy.

The public accounts committee's report focuses on Labour's 2007 Comprehensive Spending Review, which set Whitehall a £35bn "value-for-money" target, to be reached by 2010-11.

Feasibility concerns

This ordered civil servants to make sustainable savings while maintaining the delivery of services deemed to be public "priorities", it says.

But the report finds that, two years into the programme, only £15bn of reductions had been reported, of which just 38% were "definitely legitimate value-for-money savings".

The committee argues that this raises concerns over the feasibility of Mr Osborne's larger-scale plans.

Its report says: "The scale of savings needed will require much more radical action, but the results from this programme left us with grave concerns as to whether departments are ready to implement effectively a programme of value-for-money savings.

"There is a serious risk that departments will rely solely on cutting front-line services to reduce costs, without adequately exploring the potential to reduce costs through other value-for-money improvements."


Labour MP Margaret Hodge, who chairs the committee, said: "Departments were in general unable to make real value-for-money savings of 3% a year following the 2007 Comprehensive Spending Review - and that was at a time of increasing budgets.

"Now that much more radical cost-cutting measures are required across government, my committee is gravely concerned about the ability of government to make efficiency improvements on the scale needed."

Cabinet Office minister Francis Maude said: "We said that our priority would be to take the cost out of the centre of government so we could protect the front line and, in just a few months. That is exactly what we have done.

"Already, actions led by the Efficiency and Reform Group have resulted in hundreds of millions of pounds of demonstrable efficiency savings - and this is just the beginning.

Mr Maude added: "As we move forward with our ambitious efficiency programme, we expect to build significantly on the £402m already saved following a review of the government's largest projects, the £18m already saved in rent alone by vacating empty buildings and the estimated £800m we expect to save just this year from renegotiating contracts with some of the government's largest suppliers."

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