Government agrees spending cuts, but most yet to be found

By William James

LONDON (Reuters) - The government said on Tuesday it had secured billions of pounds of spending cuts at government ministries, but still faces an uphill struggle to agree further reductions equivalent to 80 percent of its 11.5 billion pound target.

Battling to reduce a big public deficit, chancellor George Osborne said seven government departments had agreed to cut between 8 and 10 percent from their 2015/16 budgets as part of a government spending review due to be announced on June 26.

But finding the remaining cuts of around 9 billion pounds is likely to strain relations within a Conservative party already divided over Britain's membership of the European Union and gay marriage as ministers try to defend their own budgets.

Britain's Conservative-led government is cutting spending to try to rein in a 114.2 billion pound budget deficit in the face of calls from the International Monetary Fund to spend more now to fund investment and avoid crimping a nascent economic recovery.

Osborne said he had managed to get government departments such as the ministry of justice and the department of energy to agree to the spending cuts ahead of the deadline and that he thought talks to find more reductions were going "pretty well".

"I don't think anyone was expecting me to turn up at the end of May and say I've already agreed seven departments and the actual date when I've got to announce the whole thing is at the end of June," he said in an interview with the BBC.

Osborne on Tuesday ruled out further cuts to a welfare budget that has already undergone a radical overhaul and is a politically-sensitive topic for the left-leaning Liberal Democrats who are the junior partner in a coalition government.

Earlier this year, the government introduced a raft of new welfare cuts, prompting senior Liberal Democrats to try and block any further measures.

RINGFENCED BUDGETS

A decision to protect the education, health and international development budgets from cuts has put other ministers under more pressure to find savings.

Among those departments yet to declare how they will find the savings required are those with some of the biggest budgets such as defence, business and the home office (interior ministry), as well as the body that funds local governments.

Following the killing of a British soldier in London at the hands of two suspected Islamist militants, interior minister Theresa May has said the budget for counter-terrorism police spending should be protected.

Defence secretary Philip Hammond has also publicly resisted a reduction to his 34 billion pound budget, saying significant further cuts would erode Britain's military capability.

The opposition Labour party has been openly critical of the government's austerity strategy and condemned the scale of the cuts the government is targeting.

"(Osborne) seems set to spend the next two years sticking to policies that are badly failing on living standards, growth and even deficit reduction," said Chris Leslie, Labour's spokesman on financial affairs.

(Reporting by Costas Pitas and Andrew Osborn; Writing by William James and William Schomberg; Editing by Catherine Evans)

Source: http://news.yahoo.com/osborne-says-seven-government-departments-agree-spending-cuts-064741561.html

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