Region ‘suffers’ as Osborne axe falls

A WARNING that East Anglian business and regeneration would suffer was issued last night after Chancellor George Osborne announced he was cutting millions of pounds of development aid.

Although the East of England Development Agency, which has invested more than �110million in Suffolk alone over the past 10 years, defiantly said it would continue its work, it will have to share a �270m funding reduction with other agencies across southern England.

EEDA escaped being axed, but it faces a severe drop in its support from Whitehall as part of the coalition government’s �6.25billion reduction in public spending this year before ministers tackle the �156bn spending deficit inherited from Labour.

Among the projects facilitated by EEDA which ministers believe could have been channelled through local authorities are University Campus Suffolk in Ipswich (�18.5m), Ipswich’s waterfront regeneration (�31.88m), Innovation Martlesham which involves a science park with up to 1,100 high-value jobs, and �9m for the OrbisEnergy offshore renewables project at Lowestoft.

Will Pope, chairman of EEDA, said the budget cut would “inevitably have an impact on businesses and communities in our region.”

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“The East of England is a main engine of recovery for the UK economy and is one of only three regions that makes a net contribution to the Exchequer,” Mr Pope said.

“EEDA remains focused on supporting businesses, creating jobs and raising skills levels across our area.”

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He said EEDA would “continue to support the recovery” in the East of England, but added cutting the budget would not be easy.

“We will work with our partners to make these reductions quickly and efficiently, while still continuing to support hard-pressed businesses, help re-balance the economy, and invest in a low carbon future.”

The Chancellor’s decision angered Labour’s Euro MP for the region Richard Howitt.

“EEDA plays a valuable and essential role in creating jobs and growing our economy. It is a vital partner in delivering European funds that nurture the region’s talent and innovation,” he said.

“I am concerned that the East of England . . . will be hard hit, damaging business growth and investment.”

However, West Suffolk MP Matt Hancock – one of George Osborne’s closest advisers in the past five years– said the state of the nation’s finances left by Labour meant “painful decisions” had to be made.

“We will be looking at the budgets and work of all the development agencies. It may well be that their work could be carried on by other organisations.”

There was better news for Choose Suffolk, which is not expecting any budget cuts. Chief executive Celia Hodson supported the Government’s aim. “We feel that there are services that should be devolved from regional bodies to local authorities and commissioned out to partner organisations which have the appropriate expertise,” she said.

CUTS of more than �6billion announced by the Government amount to less than a tenth of the “fiscal repair job” needed to the UK’s public finances, an independent economic think-tank warned yesterday.

The Conservative/Liberal Democrat coalition said the “Draconian’’ savings would send a “shockwave’’ through Whitehall and kickstart the job of paying down the Government’s �156bn deficit.

Chancellor George Osborne and his Lib Dem deputy David Laws scrapped Child Trust Funds, froze Civil Service recruitment, cut 10,000 university places and slashed �1.15bn from consultants, advertising and travel, �1.7bn by delaying or stopping major projects and �600million from quangos.

Mr Osborne said the coalition had conducted the “fastest and most collegiate spending review in recent history’’ and is “getting on with the job’’ of stopping “wasteful’’ spending.

But shadow chancellor Alistair Darling warned the package would “seriously affect’’ businesses and students and hit jobs for young people, while unions said that it would put public services at risk.

Spelling out the reductions alongside Mr Osborne at the Treasury, Mr Laws acknowledged the �6.24bn cuts are only a “first step on what will be a long road to restoring good management of our public finances.’’

“Even tougher decisions undoubtedly await us in the Budget this year and in the autumn spending review if we are to restore responsibility after the years of Labour extravagance and mismanagement of our public finances,’’ he said.

The Institute for Fiscal Studies (IFS) said yesterday’s package amounts to less than a tenth of the measures Mr Darling’s March Budget suggested would be necessary over the coming years.

The plans set out by Mr Osborne and Mr Laws implied an average 1.2% cut in departmental spending on top of the 0.5% real-terms reduction already pencilled in by the former Labour administration for 2010-11, said the IFS.

But the Government’s decision to protect spending not only on the NHS, defence and overseas aid but also schools, Sure Start and education for 16 to 19-year-olds, means that unprotected areas will face estimated cuts of 3.7% on top of Labour’s plans – resulting in an average 8.4% reduction compared with last year.

Worst-hit spending areas will include the community work of the Department for Communities and Local Government, which will have to cope with a 27% real-terms reduction in funds compared with 2009-10, the Ministry of Justice (12.1%), the Chancellor’s departments (11.8%) and the Department for Environment, Food and Rural Affairs (10%), said the IFS.

The biggest loser in cash terms is the Business Department, headed by Lib Dem Vince Cable, which sees �836m stripped from its budget.

Department for Education spending outside the protected areas is being cut by �670m.

Announcing that he will head an “efficiency and reform group’’ with Cabinet Office minister Francis Maude to help push through the savings quickly, Mr Laws admitted that some within the Government had questioned whether some of the proposed cuts were “too Draconian.’’

“Actually, my view is that, unless we send out this sort of shockwave through Government departments to say ‘You can’t spend on all these areas’... we won’t get the step change in behaviour we expect,’’ he said.

“So we are being very Draconian and very inflexible, deliberately, over the next year to drive out these types of costs.’’

Mr Laws admitted there would be “disappointment to some parents’’ that �250 Child Trust Fund payments for newborns are ending from January 1, and for seven-year-olds from August.

But he pointed out that some of the �320m saved would be used to fund extra “respite breaks’’ for disabled children.

He admitted it is impossible to estimate how many people would lose work as a result of the cutbacks, but poured cold water on reports suggesting 300,000 jobs could go. Mr Osborne said staffing figures could be reduced by not filling vacant posts, rather than making workers redundant.

Politicians will take their share of the pain, with ministers only granted dedicated cars in “exceptional circumstances’’ and expected to “walk or take public transport’’ most of the time.

Some �500m of the �6.24bn cuts will be recycled into programmes for boosting jobs and skills, while the rest will go to pay down the Government’s �156bn deficit.

Mr Darling called for the coalition to “come clean on the detail of what these cuts mean.’’

“It is already clear that these cuts will seriously affect support for business, mean fewer jobs for young people, and hit student places for this September,’’ said the former chancellor.

Public and Commercial Services union general secretary Mark Serwotka said: “A recruitment freeze now, when tens of thousands of Civil Service posts have been cut in the last few years, will further add to workloads and put at risk the services our members provide to the public.’’

Sally Hunt, general secretary of the University and College Union, said the number of extra university places available this year would be halved to 10,000.

“The Government should stop pretending that ‘we’re all in this together’,’’ she said.

“Today it dashed the hopes of thousands of people by halving the number of additional student places at universities this year.’’

However, Matthew Elliott, chief executive of the TaxPayers’ Alliance, described the announcements as a “really good start.’’

“Taxpayers have suffered the pain of a recession and rising taxes, and they will welcome the news that a government is finally making the public sector share the burden,’’ he said.

Meanwhile, council leaders were seeking more details from the Government about exactly where their share of �6bn spending cuts would come from.

The coalition’s package included a reduction of �1.165bn in individual grants to local authorities but gave no details of exactly where the axe would fall.

Core funding worth �29bn a year has been spared the axe and restrictions on what �1.7bn of grants are spent on were lifted in a bid to protect vital services.

The Local Government Association said it was “ready to talk” to ministers about town halls’ part in the cuts - but said it needed “certainty early’’ about the local impacts.

And Labour accused the Tory/Liberal Democrat coalition of a “cynical hypocrisy’’ by promising a council tax freeze at the same time as cutting grants.

Dame Margaret Eaton, chairman of the Local Government Association, said it had already identified where �22.5bn could be saved “without damaging vital frontline services.’’

“There are enormous opportunities to save billions more if we grasp the nettle and cut out the middlemen who tie up huge sums in needless red tape,’’ she said.

“We all know cuts are necessary and councils are ready to talk to the Government about how these cuts are implemented and limit their impact on frontline services,’’ she said. But she added: “It will be important to have certainty early about how the detail of the cuts package affects each and every local authority.’’

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