June 23 (Bloomberg) -- U.K. Chancellor of the Exchequer George Osborne has reached deals with his fellow ministers to cut 11.5 billion pounds ($17.7 billion) from spending for the year beginning April 2015.
A weekend of negotiations between the Treasury, which was looking for cuts, and other departments trying to protect programs resulted in agreements three days before Osborne sets out details to Parliament in a statement on June 26.
Among the final departments to settle were the Ministry of Defence, which will have to renegotiate deals with suppliers and cut civilian staff, and the Department for Business, the Treasury said in an e-mailed statement today without giving a breakdown of the cuts. Officials are finalizing agreement on 50 billion pounds of capital spending for the same year.
“Everyone around the Cabinet table knows we’ve got to go on delivering our economic plan, make those savings,” Osborne said on the BBC’s Andrew Marr show. “We’re going to do it in a way that prioritizes the services that people care about, the things that support our economy, the things that make sure we can live in a world where we can pay our way.”
The chancellor has pledged to protect the budgets of schools, hospitals and international development, requiring deeper cuts elsewhere. The Liberal Democrats oppose further reductions in welfare spending.
Because the spending plans go beyond the May 2015 general election, they will set the baseline for political debate as it approaches. The opposition Labour Party, which has objected to many of the government’s cuts so far, has said it will stick to the plans if elected. If it wants to reverse unpopular government policies, it will have to show where it will find the money.
The financial crisis has wrought havoc on public finances by sapping tax receipts and pushing up spending on welfare. Since peaking at 11.1 percent of gross domestic product in 2009-2010, the deficit has fallen by less than a third instead of the half the government projected when it took office three years ago.
Osborne also confirmed that if he’s in his post after the 2015 election, he’ll want to review whether wealthier recipients of government pensions should have some of their retirement benefits means-tested. Labour is already committed to asking the same question.
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