Treasury orders cabinet ministers to brace themselves for 40% cuts

Shock demand comes as ministers step up emergency cost-cutting across public sector


* Toby Helm, Jamie Doward and Anushka Asthana
* guardian.co.uk, Saturday 3 July 2010 22.14 BST


Cabinet ministers have been ordered by the Treasury to plan for unprecedented cuts of 40% in their departmental budgets as the coalition widens the scope of its four-year austerity drive.

The eye-watering demand from the chief secretary to the Treasury, Danny Alexander, was sent this weekend to cabinet colleagues ahead of a week in which ministers will step up emergency cost-cutting across the public sector.

The only departments not included in the Treasury trawl will be health and international development, which have been "ringfenced" for the current parliament. Education and defence will also escape lightly. Alexander has told the education secretary, Michael Gove, and the defence secretary, Liam Fox, to plan for two scenarios – cuts to budgets of 10% at best and 20% at worst over four years. All other departments – including the Home Office, the Department for Work and Pensions and the Department for Transport – have been ordered to produce plans showing the impact of cuts of 25%, and at worst 40%.

It is estimated that a 25% cut in the Home Office budget could mean a reduction in the number of police officers of almost 20,000.

In addition, all departments have been asked to show how they would slash day-to-day administration costs, excluding salaries, by 33% at the lower end and 50% at the higher end. A Treasury source said: "We are determined to tackle the record budget deficit in order to keep interest rates lower for longer, protect jobs and maintain the quality of essential public services. These planning assumptions are not final settlements, and do not commit the Treasury or departments to final settlements."

In the budget last month the chancellor, George Osborne, said that, with the exception of health and international development, departments faced average cuts of 25%. But it was expected the pain would be spread fairly evenly.

Alexander and Osborne briefed the full cabinet at a meeting last Tuesday. They stressed that asking ministers to look at the impact of 40% cuts did not mean they would be hit by such harsh settlements when final details were announced in the comprehensive spending review (CSR) on 20 October. Sources were at pains to point out that Labour had been planning cuts of 20% and that as a result the coalition's settlement would mean more for education, defence and health.

The announcement of a 40% outer limit could be seen as tactical – to prepare the public for the worst in the hope that when final details are announced they will come as less of a shock.

In a sign of how determined ministers are to act fast, the government is expected this week to halt the rebuilding of around 700 schools in order to save a further £1bn a year. And in a move that will cause bitterness among the Whitehall mandarins drawing up the cuts, ministers intend to announce plans soon to slash payoff terms for hundreds of thousands of civil servants, many of whom fear redundancy as a result of the austerity measures. Last week it emerged that at least 600,000 public service jobs could be lost.

The Observer understands that the Cabinet Office minister, Francis Maude, wants to pass legislation to change the long-standing Civil Service Compensation Scheme, which he sees as too generous. In some cases civil servants can leave with a payoff of six times their salary, though insiders say these are rare exceptions. An attempt by the previous government to change the compensation scheme failed following a successful union challenge in the high court.

Sources told the Observer that an announcement – which could lead to union threats of strike action – had been pencilled in for last Thursday and is now expected this week or next. Representatives of the main civil service unions have been called to a meeting at the Cabinet Office tomorrow.

Mark Serwotka, general secretary of the Public and Commercial Services Union, reacted angrily when told that moves were imminent. "This would be an outrageous abuse by the government, simply because it failed to get the result it wanted in the high court. We are determined to resist any attempt by the government to ride roughshod over our members' rights."

Ministers were also warned last night that the number of people classed as homeless in Britain could more than double because of "unfair" benefit cuts. The National Housing Federation, the body representing England's 1,200 not-for-profit housing associations, predicts that impending cuts to housing benefit will put a further 200,000 people at grave risk of homelessness and lead to a concentration of social problems in the most deprived areas of the country. Currently 140,000 people are classified as homeless in Britain.

The new government has unveiled plans to cut housing benefit by 10% for people claiming jobseeker's allowance for 12 months or more from April 2013. The cuts would hit Britain's 200,000 single, childless claimants hardest. Someone in London with a weekly rent of £350 would see their benefit cut by £35. The NHF said tenants would be forced to make up the shortfall from their £65.45 weekly allowance, leaving just £30.45 for food, clothing and energy.

"Cutting housing benefit could have a catastrophic impact on the lives of thousands of people who – despite their best efforts – have failed to find work after 12 months," said the federation's chief executive, David Orr. "These changes mean that up to 200,000 people could end up homeless. Quite frankly, the proposals are disturbing and unfair."

Critics also say plans to cap payments to private tenants and to reduce the level at which housing benefit is paid from 50% of local rent levels to 30% could force hundreds of thousands of families out of their homes

Treasury orders cabinet ministers to brace themselves for 40% cuts | Politics | The Observer

If the nation has spent money that it does not have and invested it in buildings which have lost their value then, even if that largely occurred in the private sector, consequences flow over.

There was a wonderfully big party. Now here's the bill.

Privatise profits, socialise losses: capitalism at work.

I like your schematic. There are the long-suffering taxpayers at the bottom. Oh look, next up are all the people who've been living off the back of taxpayers these last thirteen years. I see your Commie friends have got the Army in there, can't let them off the hook, makes no odds that it was former hardline Communist John Reid who stepped up operations in Afghanistan. Let's not forget a few bishops and the Royal Family. Like they influence decisions made by former Communists, crypto-Communists and people who like to describe themselves as Socialists and sing The Red Flag at their annual get-togethers.

There's no such thing as 'The Workers' anymore, Contra. That description is null and void because most of the workers are living on incapacity benefits. Just take a trip to the Rhondda valley and you'l see I'm right. There are plenty of taxpayers though. They mostly live in the South-East and if you want to help them you should join the Taxpayers alliance or something.

Originally Posted by bateman

I like your schematic. There are the long-suffering taxpayers at the bottom.

Workers, in fact.

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makes no odds that it was former hardline Communist John Reid who stepped up operations in Afghanistan.

Of course it wouldn't. Why would some past association provide any sort of cover for the policies he actually implements?

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There's no such thing as 'The Workers' anymore, Contra.

Oh? You think all the stuff that surrounds you was made by Rumpelstiltskin do you? Hahahaha.

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They mostly live in the South-East and if you want to help them you should join the Taxpayers alliance or something.

Sigh. I'd like to think this was meant to be a parody but of course it isn't.

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Oh? You think all the stuff that surrounds you was made by Rumpelstiltskin do you? Hahahaha.

Hahahaha? That's so fucking childish.... And no, it wasn't made by Rumplestiltskin, it was made by Chinese and other South-East Asians. If you want to look out for the workers move to China. It's an oppressive, autocratic, single party state that limits freedom, persecutes dissidents etc etc.

Yet another failed Communist experiment.

Why do you feel compelled to prosleytize for a theory that bit the dust forever over twenty years ago? Your zeal is essentially religious in nature, don't you realize that? You view Marx as perfect, infallible and beyond dispute. Just because you don't believe in god doesn't really make any difference. The psychology is just the same.

I suggest you read The Gulag Archipelago. You really should if you want to have any credibility at all. It's the best and most damning critique of a system written by someone who endured the reality of Communism under Stalin.

I laugh becuase you are a joke, bateman.

Here's the thing. In order to criticise something, you have to understand it. You don't understand it, and don't want to, and the idiot "criticisms" that you cobble together are utterly fucking laughable. All you end up doing is flaunting your impenetrable ignorance.

And then, just for bonus irony points, you, incapable of looking past the most superficial rationalisations of capitalism, have the cheek to accuse me of religious dogmatism? There's no point toalking to you. You don't know anything and don't want to know anything. It didnb;t even occur to you that, you know, workers of ther world might perhaps include the Chinese? Or to wonder who put together the roads and buildings, becuase apparently they weren't made by "workers".

Your arguments remain fatuously silly, and will remain so as long as they informed by popular prejudice, stuff your saw on TV, and what I presume is the one actual book you've read. It is quite possible for a theory to be correct and simultaneously remain unfashionable; you're in the same position of those who couldn't bring themselves to accept evolution or heliocentrism because they clash with your cherished, and popularly reinforced, dogmas. Don't lecture me on credibility.

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Your arguments remain fatuously silly

One of the things I truly enjoy at TNT is the way that reasoned argument is applied to people's positions.

Unfortunately, contra does not seem to understand.

Which arguments? What is "fatuously silly" about them? Do you conclusively refute them? Or simply disagree with them? Or secretly agree with them but cannot admit that because that undermines your ideology?

Originally Posted by contracycle

I laugh becuase you are a joke, bateman. Here's the thing. In order to criticise something, you have to understand it.

Are you fully and intimately aquainted with all aspects of Roman Catholicism? No? Would you feel free free to criticise it? I'm sure you do.

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You don't understand it, and don't want to, and the idiot "criticisms" that you cobble together are utterly fucking laughable. All you end up doing is flaunting your impenetrable ignorance.

Wrong again Contra. I read the Communist Manifesto while still a teenager. I am fully conversant with Critical Theory and Marxist dialectics. Once upon a long, long time ago I would have described myself as a Communist. I read Tariq Ali ffs...

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And then, just for bonus irony points, you, incapable of looking past the most superficial rationalisations of capitalism, have the cheek to accuse me of religious dogmatism?

If it waddles like a duck and quacks like a duck.. It's your absolute, unshakable and unquestioning faith that gets up my nose. You seem to take any criticism of your belief system very personally and that suggests to me that you are emotionally invested. Devoutly religious people also have extreme difficulty in dealing with any criticism of their beliefs, gods, icons and so on. It generally stems from a need for security and certainty.

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There's no point toalking to you.

Why? Because I have pissed you off?

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You don't know anything and don't want to know anything.

Getting personal...

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It didnb;t even occur to you that, you know, workers of ther world might perhaps include the Chinese?

Which ones? See, the problem I have with this descriptive term is that it appears to exclude a lot of people who work. I'm sure you wouldn't accpet that a factory owner (like Engels!!) was a 'worker' but he was definitely a taxpayer. So are all the shopkeepers and small business owners and other small owners of 'the means of production'. Some of them work really hard and pay a lot of tax so it seems unfair to exclude them, somehow.

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Your arguments remain fatuously silly, and will remain so as long as they informed by popular prejudice, stuff your saw on TV, and what I presume is the one actual book you've read.

More personal attacks.. have I upset you?

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It is quite possible for a theory to be correct and simultaneously remain unfashionable; you're in the same position of those who couldn't bring themselves to accept evolution or heliocentrism because they clash with your cherished, and popularly reinforced, dogmas. Don't lecture me on credibility.

Funny, you accuse me of being rigid in my beliefs... I'm tempted to Hahahaha right back at you but I will restrain myself.

What is there to talk about, bateman, when your opening gambit is to accuse me of religious dogmatism? Huh, and then you complain about ad hom.

All this nonsense about "unquestionable faith"; this is just a mask for your inability to construct a cogent criticism. I don't do belief: come up with a better theory and I will always accept it. But you haven't got a better theory, and then act all outraged when I refuse your demand to rejoin the herd.

And frankly I find your claims of familiarity with the topic difficult to believe given the arguments you advance. If you are so well read your argument that there are "no workers" now becomes even more farcical; it should be perfectly clear that workers are those who live by selling their labour, and perhaps such creatures are rare in your presumably rarified social circle, but I assure you it accounts for eveyone I know or ever expect to.

Oh, and for the record, I do know a fair bit about Roman Catholocism, but even so I don't make a habit of engaging them on theology. I'm perfectl;y entitled to criticise institutional behaviour though becuase of their claims to divine revelation and infallibility - claims which no Marxist has ever advanced.,

Do you really want to talk about any of this stuff? I don't think you do, becuase you always ignore whatever I say and return to accuse me of dogmatism. Now, I'm sure that you need to believe that, but I don't have to humour you.