LONDON (Reuters) - The Conservative-Liberal Democrat coalition government’s first budget on June 22 will outline the full scale of spending cuts needed to tackle record budget deficit, senior minister David Laws said.
In an interview in Saturday’s Financial Times, the Chief Secretary to the Treasury -- deputy to new finance minister George Osborne -- also said the coalition wanted government departments to get this year’s initial six billion pound savings out of the way quickly.
“We are now moving from an age of plenty to an age of austerity in the public finances,” Laws said.
“It will be absolutely clear when we make the budget announcements just the scale of the consolidation that we’re talking about and our determination to achieve that.”
Faced with fears of contagion spreading from the euro zone’s fiscal crisis, the new coalition government has vowed to put deficit reduction at the top of its list of priorities.
Following the financial crisis, the budget deficit is forecast to hit 163 billion pounds this year, equivalent to about 11 percent of gross domestic product.
However, that estimate is likely to change come budget time with a new independent body of experts expected to produce updated forecasts before June 22.
Many analysts expect that body to conclude that the previous Labour government’s estimates for economic growth were too optimistic, making the debt mountain even higher to climb.
The coalition is worried that, without urgent action, the government’s debt burden could trigger a downgrade to its top notch credit rating and drive Britain into another economic crisis.
Government aides say Osborne will publish the overall spending envelope in his emergency budget, which will then feed into a three-year spending review due later in the year.
That review will detail the magnitude of cuts each government department will have to bear.
On Monday, the government is due to announce how six billion pounds of 2010 savings will be divided across departments, with areas such as consultancy, information technology, property and advertising likely to come under the axe.
“We really want to make sure that by the time you get to the serious spending review, departments have tackled the easy low hanging fruit,” Laws said.
Laws said the coalition, formed after the May 6 election failed to produce an outright winner, would also “seriously consider” lengthening the spending review to five years.
“Fiscal consolidation is going to be much easier with a coalition government that’s got broad support,” he said, saying the coalition would “bring down the structural deficit more rapidly than at present”.
Reporting by Matt Falloon, editing by Mike Peacock
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