George Osborne and David Laws today have announced £6.24 billion in spending cuts to be implemented imminently. The cuts cover:
• £1.15bn in "discretionary" areas such as consultancy and travel costs• £95m through savings in IT spending• £1.7bn will be saved in delaying or stopping government contracts and projects• Reductions in property costs will save £170m• More than £120m expected to be found through a freeze in civil service recruitment• £600m by cutting the cost of quangos• £520m will be saved through other low-value spending
Our deficit this year is £167 billion or around a quarter of government spending so these cuts comprise around 1% of all spending. I run my own business and I am sure that if we approached the bank for an overdraft to cover a quarter of our turnover the bank would expect us to make cost reductions as part of the deal. In fact I am sure they would expect us to make much more than 1% savings.
I know that the national economy cannot be directly compared with a business due to its scale and various knock-on effects at a macro level but even so with such a huge deficit and with the problems in Greece and other European countries potentially spreading the problem is acute. We need to start tackling it now.
I am glad to see the new government doing so. It bodes well for the reductions that will need to be made in future years to get our economy back on track.