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Osborne Vows to Stick to Budget Plan as Skepticism Grows on Spending Cuts

U.K. Chancellor of the Exchequer George Osborne stressed his commitment to virtually wiping out the budget deficit over the next four years after lawmakers and former civil servants said he’ll struggle to stick to the plan.

Osborne told a parliamentary panel he expects departments to find ways of operating more efficiently and said he is looking at ways to control welfare and debt-interest costs.

“I have done everything I can to move Britain out of the financial danger zone,” Osborne told the cross-party Treasury Committee in London today. “We are not on negative watch with the credit rating agencies. The question mark they will always have is, can we see the measures through, and I believe that we can.”

Rachel Lomax and John Gieve, both former permanent secretaries at government departments, said this week that Osborne may find it hard to reduce spending by 81 billion pounds ($130 billion) a year by 2015 amid opposition to the cuts from voters and some politicians in the coalition government.

Further doubts were expressed today by Parliament’s Public Accounts Committee, which said in a report that officials had proved incapable of cutting government waste in recent years.

“Now that much more radical cost-cutting measures are required across government, my committee is gravely concerned about the ability of government to make efficiency improvements on the scale needed,” said Chairwoman Margaret Hodge, an opposition Labour Party lawmaker. “There is a serious risk that to reduce costs departments will rely solely on cutting frontline services.”

Efficiency Savings

Asked how he intended to achieve more efficiency gains, Osborne said he left it to departments to find the cuts in their administrative costs outlined in the Oct. 20 spending review.

“I have not set out with every dot and comma what every department needs to do with every pound of its budget,” Osborne said. “I want them to take responsibility for the delivery of their budgets.”

Departments face cuts of 19 percent on average over the next four years as the government seeks to narrow the deficit to 2 percent of economic output by 2015 from more than 10 percent today. Prime Minister David Cameron has asked ministers to step up the search for savings to minimize the impact on services.

With the economy facing a “choppy outlook,” Osborne argued his austerity program is providing a spur to growth by removing the threat to Britain’s credit rating and keeping interest rates low.

Labour lawmaker John Mann suggested Osborne’s plan is driven by an ideological desire to shrink the state given that Britain’s debt stock will be below that of the U.S. and France after five years.

Osborne said he is looking at “a new framework” for annually managed expenditure, the part of the budget the Treasury is least able to control. It includes debt-interest and social-security costs and accounts for almost half of Britain’s 700 billion pounds of annual spending.

“That’s one of the big challenges facing the Treasury, the annually managed expenditure,” he said. “We are looking at a new framework for that in the budget,” which, Osborne said, will be published on March 23.

To contact the reporter on this story: Gonzalo Vina in London on gvina@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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