Cameron orders Ministers to draw up 40 per cent spending cuts - the biggest in history

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Cameron orders Ministers to draw up 40 per cent spending cuts - the biggest in history
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David Cameron is ready to approve the biggest public-spending cuts in the history of the developed world in a dramatic bid to cut ­Britain's soaring national debt.

He has ordered Cabinet Ministers to draw up 'Doomsday' savings of up to a staggering 40 per cent which could see vast parts of the public ­services shut down and tens of thousands of policemen, teachers, town hall workers and other civil servants lose their jobs.

The proposed cutbacks are even more extreme than emergency reductions used in other countries such as Canada and Ireland and are double the amount of the Geddes cuts imposed after the First World War when Britain faced bankruptcy from government debt and waste.

Mr Cameron's shock initiative is a massive personal and political gamble.

There were gasps at a meeting of the Cabinet on Tuesday when Ministers were informed of the package.

It could provoke a wave of crippling strikes – and may well threaten Mr Cameron's alliance with Liberal Democrat leader Nick Clegg. Many Lib Dem MPs, already unhappy with the VAT rise and cuts in benefits,are likely to rebel against the draconian new measures.

However, if it works, it could result in a ­second Election victory for the Prime ­Minister.

The plan to cut public spending by nearly half over four years is revealed in a letter from Treasury Chief ­Secretary Danny Alexander to Mr Cameron yesterday.

The letter, which has the full backing of Mr Cameron and Chancellor George Osborne, instructs Ministers in most departments to draw up two sets of cuts. One is based on a spending reduction of 25 per cent.
Danny Alexander

Putting on the squeeze: The depth of cuts were revealed in a letter from Danny Alexander to Mr Cameron

The second – 'Doomsday' – ­scenario demands to know what would ­happen if they lost 40 per cent of their budget.

Mr Alexander has given the Armed Forces and schools a degree of ­protection by requiring the Ministry of Defence and the Education Department to draw up two lesser sets of cuts – based on ten per cent and 20 per cent.

The NHS and overseas aid are exempt from the spending purge in line with Mr Cameron's Election pledge to ring-fence their budgets.

The suggested 40 per cent cut would go even further than last month's Emergency Budget, when Mr Osborne announced real-term cuts across all Government departments of 25 per cent over four years.

A Treasury spokesman said: 'Mr Alexander has asked Ministers to provide a range of outcomes and draw up illustrative plans so we can see precisely what the effect of different spending reductions would be.

'The idea is to say, "If you cut by a) 25 per cent, what would it mean, and if you cut by b) 40 per cent what would it mean?"
George Osborne

A case of the blues: Chancellor George Osborne could preside over historic cuts

'When we have seen the results we can make a decision as to the best course of action.

'We have always said we would not touch the health and international development budgets. And we have maintained our commitment to ­recognise the importance of defence and education.'

Treasury officials said Mr Osborne had decided to make the contents of Mr Alexander's letter public 'because we do not want to be accused of concealing anything'.

A final decision on where the ­public-spending axe will fall – and how deeply it will cut – will be made by Mr Osborne on October 20.

The date may well go down in history as Black Wednesday – at least to those who stand to lose most. But the ­disclosure does not necessarily mean that the 40 per cent cuts will be imposed.

The figure could be a tactical manoeuvre by Mr Cameron intended to sweeten the pill if lesser cuts of 25 per cent, for instance, are ordered.

A Treasury official said: 'We are not saying cuts of 40 per cent are going to happen.

'We are saying to Ministers to go away and come back and tell us what the public services would be like under 25 per cent or 40 per cent cuts.

'We realise it is a tough objective but we have said we think 80 per cent of savings should be achieved through spending cuts against 20 per cent in tax rises.

'We believe the public supports that approach.'

In anticipation of Labour attacks, Ministers claim that Gordon Brown had already drawn up secret plans for cuts of up to 30 per cent if he won the Election.

Mr Osborne has studied closely a similar economic rescue package used in Canada in the Nineties.

The Canadian government turned a large deficit into a surplus within three years with a 'bloodbath budget' which levelled cuts of 20 per cent – half of the maximum ­figure under consideration by Mr Cameron.

But critics point out problems with the parallel.

Crucially, no departments were spared in Canada – whereas in the UK the £104 billion NHS budget is sacrosanct, while the £57 billion schools budget and £46 billion defence budgets are likely to suffer cuts limited to just ten per cent.
...and it's Boris vs Eric in London's great Budget battle

Boris Johnson is 'set to explode' about plans to cut his £7 billion budget for London by 25 per cent.

In an unexpected challenge to the Coalition, the Tory London Mayor told Ministers last week that he would fight 'tooth and nail' to stop Local Government Secretary Eric Pickles from cutting the capital's cash.

Mr Johnson, seen as a potential future Tory leader, said it was unfair to target London because he had already cut spending in the city since being elected two years ago.
David Cameron

'Set to explode:' Mayor for London Boris Johnson is said to be furious about further cuts to London's budget

A source close to the Mayor said: 'Boris believes a 25 per cent cut for London would be outrageous.

'He has already made enormous cuts. For example, the London Development Agency has had its staff cut from 600 to 300.

'He thinks it is completely wrong to cut London's money when it started making savings long before the Coalition came to power.

'If this goes ahead it will have a devastating effect on public services in London. Boris is prepared to explode.'

A spokesman for Mr Pickles refused to respond to Mr Johnson.