Newsroom & speeches
24 May 2010
Seven days ago, I stood in this building and told you that this new coalition Government’s top priority was to bring confidence back to the economy, by showing that we could deal with Britain’s record deficit, starting this year.
I told you we would cut wasteful spending.
I told you there would be in-year reductions in departmental budgets.
And that we would do this while protecting the quality of key frontline public services.
Today I can tell you that we have delivered on every single commitment we made.
In the space of just a week, we have found and agreed to cut £6 ¼ billion of wasteful spending, across the public sector.
Of that, £500m will be recycled and used to invest in targeted measures to improve Britain’s long-term growth potential and build a fairer society.
But the great majority will go towards cutting the deficit this year so we can avoid the jobs tax next year.
We have conducted the fastest and most collegiate spending review in recent history.
That is what this new Government is all about.
Rolling up our sleeves, getting on with the job, working together in the national interest, delivering on our promises, getting a grip.
There were many who said it couldn’t be done.
That we alone in Europe were concerned about debt.
That only cuts to frontline services were feasible because all the efficiencies possible had already been found.
We have comprehensively demolished all of these arguments.
I am not claiming that it has been easy.
We have worked incredibly hard over the past week.
And we have delivered.
I would like to thank Sir Peter Gershon and Dr Martin Read for their advice in opposition, which gave us the confidence to believe this could be done.
We are creating an Efficiency and Reform Group at the centre of government to take their approach forward.
I would also like to thank the Chief Secretary, David Laws, for all his work to deliver today’s announcements.
He led our negotiating team and spoke personally to almost every Cabinet colleague.
He will shortly set out the detail of what we are announcing today.
But let me explain the three principles that have underpinned our approach.
First, the need for urgent action.
This is set out in the first line of our coalition agreement.
We sought the advice of the Treasury and the Bank of England and both confirm that there is a strong economic argument for taking early action to deal with our debts.
As the Governor of the Bank of England said “it is essential to take measures this fiscal year to demonstrate the determination of the new Government”.
We need to take urgent action to keep our interest rates lower for longer.
To boost confidence in the economy and protect jobs.
To show the world that we can live within our means.
We need to tackle the deficit so that our debt repayments don’t spiral out of control.
The more we do now, the more we can spend on the things that really matter in the years ahead.
Already we are paying out more on debt interest that we spend on defence, on transport or on the police.
If we don’t take action, we will soon be spending more on servicing our debts than on educating our children.
Those who are serious about engaging in the debate about Britain’s economic future need to provide answers to these problems.
They can’t pretend these problems don’t exist or side with every vested interest that exists to defend each line item of government spending.
It is all very well to write a letter saying the money has run out – the real challenge is having an answer to that letter.
Around the world there is a decisive shift taking place.
Countries are waking up to the dangers of a sovereign debt crisis and taking action to live within their means.
Last week I twice attended meetings of European Finance Ministers.
Let me tell you, sitting at that table of 27 Finance Ministers I could not help but be conscious that I represented the country with the biggest budget deficit of all.
In those councils the previous British Government was an advocate of dither and delay.
That has now changed and Britain is now a leading voice in Europe for fiscal responsibility.
The second principle underlying our approach is that we are all in this together.
That means looking after the most vulnerable.
Let me give you an example.
While we will be cutting the Child Trust Fund, as David will explain, the money that would have gone to disabled children will now to be used to fund respite care.
We’re all in this together means cutting wasteful spending while protecting the quality of the key frontline public services we all depend on.
That is exactly what we promised we would do.
And it is exactly what we have done.
We will save over £1bn in discretionary spending including consultancy and travel costs.
Nearly £2bn from IT programmes, suppliers and property.
Over £700m from restraining recruitment and cutting quangos.
Over £500m from cutting low value spending.
Because we have found these savings, I am able to make a new commitment that we didn’t think possible before.
I had already agreed that savings for health, defence and international development will be reinvested into their frontlines.
Today I am also able to protect schools, funding for Sure Start Centres, and 16-19 education spending from these in-year cuts.
Schools will have to become more efficient, like everyone else, but their savings will be reinvested into the frontline this year.
We have shown those who argued that schools would suffer that it is possible to take early action to deal with our debts while improving our children’s education.
That leads me to the third principle that underpins our approach.
We are doing this for a reason.
Controlling spending is not an end in itself.
The savings we have identified enable us to commit to avoiding the previous Government’s jobs tax, due to come into effect next year.
Let me remind you what the businesses of Britain said during the election campaign: “Cutting government waste won’t endanger the recovery – but putting up national insurance will.”
This is just the first step towards creating better public services, a stronger economy and a fairer society.
This is the first time this Government has announced difficult decisions on spending.
It will not be the last.
But I want people to know in the years ahead that we do this not for its own sake but in order to improve the quality of people’s lives and build a better economic future.
We inherited an economic mess, but we can come out of it stronger.
Let me remind you, on these vital economic issues, of what this Government has already achieved in these thirteen days in May:
Tomorrow in the Queen’s Speech and later in the spending review we will launch a programme of structural reform to raise productivity and permanently improve the quality of the key frontline services people receive.
So today we take the first step towards building a public sector that really delivers value for money, and an economy that works for everyone.
We will now hear from David, who will take you through the detail.