Countdown starts to the emergency Budget

Political Editor GRAHAM DINES says the mood music at the Treasury is that the Lib Dems will prevent George Osborne from an over enthusiastic cull of public services

YOU’VE been warned - George Osborne’s emergency Budget is to be presented on June 22 as the new coalition Government attempts to overcome the appalling state of the economy inherited from Labour.

It will be tough - as the investment bankers contemplate what country mansions and fast cars they will buy out of their fat bonuses which have been paid despite their jobs being rescued by the taxpayers, ordinary families are about to be clobbered as perhaps never before.

There’s little doubt that if Labour had been re-elected, it would be going through the same public spending review that the Conservatives and Liberal Democrats are embarking on.

For months, Gordon Brown kept pretending that the choice at the election was between “Tory cuts and Labour investment.”

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Everyone knew that his was cynically absurd and untrue. And eventually, Cabinet colleagues persuaded Brown to drop this disingenuous sound bite as the size of the Budget deficit grew and grew.

However, Brown and Darling insisted until the bitter end that to make cuts in the current financial year would wreck the recovery.

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As he confirmed his Budget date yesterday, Osborne also made a decision radical as Brown’s in 1997 to make the Bank England independent - yesterday the new Chancellor created an Office for Budget Responsibility.

His bold move removes from political control responsibility for setting the forecasts for economic growth and government borrowing - on which the Budget calculations are based.

It’s as risky a political strategy as David Cameron’s coalition agreement to introduce fixed term parliaments, which will prevent him and future Prime Minister’s from holding an election when he or she has the best chance of winning.

The Office for Budget Responsibility, to be headed by Sir Alan Budd, will stop key economic indicators from being manipulated for party political advantage.

“Again and again, the temptation to fiddle the figures, to nudge up a growth forecast here or reduce a borrowing number there, to make the numbers add up has proved too great, and that is a significant part of the reason for our current problems,’’ Osborne said at a news conference yesterday.

“I am the first Chancellor to remove the temptation to fiddle figures by giving up control of the economic and fiscal forecasts. I recognise that this will create a rod for my back down the line.

“That is the whole point. We need to fix the Budget to fit the figures, not fix the figures to fit the Budget.

“We urgently need a full, independent, assessment of how bad the problem is, ‘’Mr Osborne said - indicating it would be published ahead of the emergency Budget.

“Everyone will be able to see the scale of the problem to which the Budget must provide the solution,

Osborne was speaking at the first joint media appearance of the Tory Chancellor and his Liberal Democrat Chief Secretary of the Treasury David Laws.

And it was obvious the pair would not be deflected from one of the Conservatives’ key manifesto pledges - action will be started immediately on cutting the huge public spending deficit inherited from Labour.

An emergency Budget will be presented to Parliament on June 22, and next week, the Chancellor will be setting out details of the �6 billion of spending cuts to be made this year.

Osborne and Laws have agreed that the cuts this year would be achievable without affecting frontline public services.

“The Treasury’s assessment is that there is a strong economic case for an immediate spending reduction of �6 billion. So we are in no doubt that this action is advisable.

“By tackling wasteful spending now rather than later, we can demonstrate our commitment to tackling the deficit.’’

If the Treasury thinks that now, that suggests it did so in the run up to the General Election. If that was the case, then Gordon Brown and Alistair Darling must have ignored the advice for purely party political advantage.

Osborne is attempting to prevent the already wounded British economy from hitting similar problems now afflicting Greece.

“This is the legacy of 13 years of fiscal irresponsibility. And it poses a very real threat to the recovery,’’ he said.

“Greece is a reminder of what happens when governments lack the willingness to act decisively and quickly, and when problems are swept under the carpet.

“If we fail to tackle the deficit we inherited from the previous government, the consequences could be disastrous.’’

The two coalition politicians in charge of the Treasury will review every new spending commitment and pilot project signed off by Labour ministers since the turn of the year in a bid to find savings “in addition’’ to the �6bn target.

The Chief Secretary said he had already rejected some suggested cuts which he believed would have damaged frontline services.

“I have, and I will, reject any proposals which would damage key services or put at risk those on lower incomes,’’ said Laws.

This demonstrates that excesses which might have been contemplated had the Tories been in power on their own are unlikely to be implemented by the coalition.

But while there may well be a greater willingness to defend front line services for the most vulnerable, those cuts have got to come from somewhere.

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