George Osborne: Seven departments agree new cuts

George Osborne has reached agreement with seven Whitehall departments on savings he wants made in 2015.

The chancellor said he had found 20% of the £11.5bn he wants to cut spending by in the year from April 2015.

Justice, energy and communities are among the departments agreeing to "significant savings", he said, adding that health, schools and foreign aid would be protected from cuts.

Labour says the government is sticking to policies "that are badly failing".

Mr Osborne told the BBC that no chancellor had got so far in agreeing so many plans so far ahead of a spending review, which is due towards the end of next month.

The spending period in question covers the month before the expected date of the next general election, scheduled for May 2015, and the year after.

The departments that have agreed cuts of between 8% and 10% are: the Ministry of Justice, the Department for Communities and Local Government, the Department for Energy and Climate Change, HM Treasury, the Cabinet Office, the Foreign and Commonwealth Office, and the Northern Ireland Office.

'On track'

Mr Osborne said the scale of the savings expected was "difficult" but necessary to reduce government borrowing and to ensure money could be found to spend on the "nation's priorities", such as the health service.

"The fact we have got big departments like the Ministry of Justice signed up to 10% reductions shows we are on track and there is a cabinet will behind delivering these necessary savings," Mr Osborne told BBC Radio 4's Today programme.

Negotiations over savings are continuing with other big departments, such as the Ministry of Defence and the Home Office.

He insisted they would not do anything to put at risk people's safety "at home or abroad", adding that the counter-terrorism budget was among those areas likely to be ring-fenced.

The full financial details will be held back until the spending review is presented to Parliament next month.

But it is understood that, taken together, the savings agreed so far in talks with departments and in previous announcements mean the Treasury still has to find £8bn-£9bn of the £11.5bn to be saved.

Given that health, schools and foreign aid budgets continue to be protected, this means that remaining departments, such as transport, defence, business and the Home Office, are likely to have to make 8% cuts.

There have been reports that some ministers, such as Defence Secretary Philip Hammond, are unhappy about this but Mr Osborne said all his colleagues accepted the need for further savings, and he was "confident" they could be achieved.

Affordability

Mr Osborne rejected suggestions the cuts would undermine frontline services in areas such as criminal justice, saying major changes were also under way to make the courts and probation services more efficient.

The government, he added, was "trying to improve the quality and productivity of public services while making sure we are not wasting money" and Whitehall "could not be let off the hook" in the push for more efficient government.

He also suggested that there would be no further cuts in welfare in the year in question on top of the "substantial" ones already announced. He also rejected the suggestion of tax increases.

Business Secretary Vince Cable said that Liberal Democrat members of the coalition government had "made it very clear... simply taking more off people at the bottom end of the scale is not the way to proceed".

He told the BBC he had had "very amicable" discussions with Treasury colleagues and would be making the case "that we need to invest more in training and science and innovation and business support if we are going to get the economy going".

The government has already announced billions of pounds in cuts for the 2010-15 period, but Labour says its austerity drive has stunted growth and the deficit is rising again.

Chris Leslie, shadow financial secretary to the Treasury, said David Cameron and Mr Osborne's plan was meant to "balance the books by the next election, but their failure on growth and jobs means the deficit is now set to be over £90 billion in 2015".

He said: "That's why the chancellor is now asking for even more spending cuts, with most big departments yet to reach agreement.

"George Osborne should be asking himself what's gone wrong and taking action to get the economy growing strongly between now and 2015. Sadly, he seems set to spend the next two years sticking to policies that are badly failing on living standards, growth and even deficit reduction."