Doomsday: 30 per cent planned public spending cuts are biggest in history

By Simon Walters for The Mail on Sunday and Glen Owen for The Mail on Sunday
Updated: 03:03 EST, 20 September 2009

Axeman? Alistair Darling would have to cut public spending

Secret plans to slash public spending by up to 30 per cent, with massive cuts affecting public transport, the Armed Forces, schools, hospitals and welfare benefits, are being drawn up by Whitehall mandarins.

The draconian proposals could see spending reduced by a staggering £75billion a year, the biggest cut in British history.

After the two World Wars, when Government coffers were empty, spending was cut by about 20 per cent. In the Seventies, the Labour Government cut spending by less than ten per cent to try to pull the nation back from bankruptcy.

The Mail on Sunday has learned that regardless of whether Alistair Darling or George Osborne is Chancellor after the next General Election, the cuts could be bigger this time. Senior Whitehall officials are working on a series of ‘doomsday’ options, including savings of up to 30 per cent in some departments.

It will be up to Ministers to decide whether to go ahead – or scale them back for fear of inflicting too much pain on voters.

The 30 per cent total is far higher than any of the figures discussed by either of the two main parties.

Both have accused each other of planning cuts of about ten per cent.

While Gordon Brown and David Cameron have refused to provide their own figures, senior civil servants, who are in constant contact with both parties – and under a duty to make realistic plans – have done it for them.

The Mail on Sunday understands that two departments, Transport and Defence, have devised a blueprint for cuts of up to 30 per cent, while others have made similar provisions for reductions of between ten and 20 per cent.

It could shrink the public purse by a record £75billion a year.

Cuts: Schools Secretary Ed Balls suggested reducing numbers of head-teachers and assistant heads

Jonathan Baume, general secretary of the senior civil servants’ union, the First Division Association, said last night: ‘There is a growing recognition across Whitehall that politicians of all parties are talking about much deeper cuts than had been anticipated. The cuts may be starker than we have ever seen before.

‘Senior civil servants know that whoever wins the Election, Ministers will want all the options in front of them. If things are really grim, major projects will have to be cancelled.’

Such savage cuts would force the Government to enact previously unthinkable reforms, such as the abolition of child benefit.

Only the core functions of schools, hospitals and the Armed Forces would remain relatively immune.

In stark terms, if applied to the departments of Health and Education, it would mean the loss of 112,000 nurses and 129,000 teachers.

The Conservatives have already pledged to protect NHS spending levels and, in reality, the cuts are likely to be less harshly applied in areas with such a direct impact on voters.

But last night Schools Secretary Ed Balls signalled that, although he had no plans to cut the number of frontline teachers, thousands of senior school staff could lose their jobs.

In an interview, Mr Balls detailed more than £2billion of cost savings, worth five per cent of the total schools budget, and said: ‘It is going to be tougher on spending over the next few years.’

He suggested numbers of head-teachers and assistant heads could be reduced by getting comprehensives to come together in ‘federations’.

Education officials are said to believe that about 3,000 senior school posts could go, saving £250million a year.

A 30 per cent cut to one of the most vulnerable government departments, Defence, would require a slashing of nearly £11billion from its annual £36billion budget.

The Trident nuclear deterrent, which is projected to cost £70billion over 25 years, would be an obvious target, saving £3billion a year over the first three years – although opponents say cancelling it would deal a devastating blow to Britain’s international standing.

Other defence projects, such as the £1billion-a-year Eurofighter project and the Defence Training Review contract (£500million a year) would also be vulnerable.

Transport, the other department in the main firing line, would need to shave £4billion from its £13billion budget.

Cancelling Crossrail, the planned £16billion link between West and East London, would save £2billion a year between now and 2017.

Big-ticket infrastructure projects, such as the new £34billion high-speed line between London and Scotland, could also be shelved, while land owned by the Highways Agency could be sold for £80billion to swell the coffers.

Across all departments, the annual £44billion Government budget for capital investment in public services, such as new school buildings, is already due to fall by £26billion by 2012. Under the doomsday scenario, it could be pared back even further.

The Regional Development Agencies (costing £2.3billion a year) and the Building Schools for the Future programme (a further £2.3billion a year) could be heading for the scrapheap, while cancelling the ID card scheme would save £500million a year.

Public sector pay costs £170billion a year. A freeze on wage rises would save £2.4billion a year, while the suspension of subsidies to unfunded public pension schemes could save billions more.

The social security bill – predicted to rise by £8billion a year by 2014, as the cost of dole payments stacks up – is also likely to be trimmed.

The main parties are already considering the restriction of child benefit. But if there are 30 per cent cuts, all child benefits and tax credits could be axed to save £8billion a year.

Carl Emmerson, from the authoritative Institute for Fiscal Studies, said a 30 per cent cut ‘would require some extremely difficult sacrifices’.

He added: ‘It would probably affect all areas of public services and be combined with both cuts to welfare spending and further tax-raising measures.’

Matthew Sinclair, research director at the TaxPayers’ Alliance, said: ‘The Government has utterly failed to manage the nation’s finances and spent as if a temporary boom would last for ever.

As a result of that profligacy, officials are now having to consider drastic cuts that would require a fundamental rethink about which of the State’s functions really are essential.

‘This is the nightmare scenario the country will be faced with if politicians don’t make more sensible, targeted cuts soon enough and on a sufficient scale.’

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