Cuts to social welfare budgets of at least £7 billion, at least half a million public sector job losses with a further half million redundancies in private firms, an increase in the retirement age to 66, and swingeing 28 per cent cuts to town hall budgets dominated the first Comprehensive Spending Review since 2007.
The Government announced its intention to take £81 billion out of public spending over the next four years and eliminate the structural deficit in five years.
It insisted that the resulting lower interest rates would be good for business.
Chancellor George Osborne said the measures bring Britain “back from the financial brink”. But Labour leader Ed Miliband called it a “dangerous gamble with people’s livelihoods”.
Mr Osborne said that Britain’s structural deficit of £109 billion is unsustainable and the largest in Europe. Just paying the interest alone cost the country £43 billion a year, he told MPs.
But Shadow Chancellor Alan Johnson said the Government had successfully peddled a myth about the causes of the deficit and concealed the truth that interest debt had been falling since the beginning of this year.
Attacking the “deficit deceivers” in government, he said the reality was the combination of the bank rescue and economic stimulus measures had kept people in their jobs and homes.
He claimed the cuts were driven by Tory ideology. Mr Johnson pointed to Ireland where huge cuts and austerity measures were hailed by the European Central Bank, European Commission, the International Monetary Fund and money markets only to see the country go back into recession within months as demand was taken out of the economy and its borrowing costs increased.
Accountants and auditors KPMG said the local government cuts would severely test the viability of many town halls and councils who will have to be “ruthless” about deciding front-line service priorities.
TUC general secretary Brendan Barber said the “eye-watering” cuts would “have a desperate impact on communities, business and hard-pressed families…worst of all, to score a cheap party political point about Labour spending plans, he has loaded cuts on to benefits and welfare payments.”
He said the cuts and absence of any credible growth measures amounted to “misery today, moonshine tomorrow”.
Business leaders insisted that the private sector is capable of creating a million new jobs to replace those expected to be lost in both the public and private sectors.
British Chambers of Commerce chief executive David Frost said that between
April and June of this year some 300,000 jobs had been created in the private sector already.
