UK Chancellor in mini-budget warning

UK Chancellor George Osborne will warn there are no "miracle cures" for Britain's problems today as he admits more drastic action is needed to balance his government's books.

UK Chancellor in mini-budget warning

UK Chancellor George Osborne will warn there are no "miracle cures" for Britain's problems today as he admits more drastic action is needed to balance his government's books.

In a bleak mini-budget, the Chancellor is to confirm that Whitehall departments are being ordered to find further cuts to fund £5bn (€6.16bn) of "shovel ready" projects designed to kick-start the economy.

He is also widely expected to concede that sluggish growth means it will take longer to tackle the deficit and a key coalition target to have public-sector debt falling by 2015-16 may be missed.

The political and economic high-wire act was made even trickier last night when the statistics watchdog rejected ministers' claims that health service spending has been rising in real terms. British Prime Minister David Cameron pledged at the general election to "cut the deficit not the NHS".

Delivering his crucial Autumn Statement this afternoon, Mr Osborne will argue that he is "confronting the country's problems, instead of ducking them".

"The public know that there are no miracle cures. Just the hard work of dealing with our deficit and ensuring Britain wins the global race," he will say.

Mr Osborne and Chief Secretary Danny Alexander briefed the Cabinet yesterday on the plans for £5bn (€6.16bn) of capital projects over the next two years, which Cameron said would "make a difference in our country and in our economy".

It will include £1bn (€1.23bn) to build or expand up to 100 new academies and free schools over the next two years, with the cash directed at areas experiencing a shortage in classroom places.

Treasury sources said the cuts in departmental spending amounted to less than the £3bn (€3.7bn) total underspend by departments over the past two years. The rest of the money is due to be found from existing budgets.

But Labour said the announcement amounted to an admission that the reduction in infrastructure spending since 2010 had been "a catastrophic mistake" and weakened the economy.

Concerns were also raised over the impact on services like the police and social care of cuts to current spending amounting to 1% (£950m/€1.17bn) in 2013/14 and 2% (£2.5bn/€3.1bn) in 2014/15.

The chairman of the Police Federation of England and Wales, Paul McKeever, said forces were already having to cope with "crippling" 20% budget cuts before today's "flabbergasting" announcement.

Meanwhile TUC general secretary Brendan Barber said the cuts would "put our stretched public services under even greater strain", while the £5bn (€6.16bn) additional investment was "nowhere near enough to undo the damage caused by £22bn (€27.1bn) of infrastructure cuts of the last two years".

Health, schools, international aid, HM Revenue and Customs and nuclear decommissioning will be protected from the latest round of cuts, while local government will be exempted for the first year and the Ministry of Defence will be given flexibility to carry over savings from previous years. The changes apply directly only to England, but will have a knock-on impact on devolved administrations.

The decision to inflict further cuts on Whitehall budgets comes after a mid-term spending assessment carried out by Mr Alexander, which found that departments had exceeded their savings targets.

Mr Osborne will also use today's statement to signal his approval for up to 30 new gas-powered electricity power stations, as well as floating possible tax breaks and regulatory reforms to encourage investment in innovative "fracking" technologies for extracting gas from shale deposits.

Friends of the Earth denounced the policy as a "reckless dash for gas" and the GMB union said it was "madness" to burn more gas to produce electricity when wholesale prices were increasing.

But the Institute of Directors said gas will be needed until renewable energy sources become more reliable and affordable.

UK Statistics Authority chairman Andrew Dilnot rebuked ministers last night for repeatedly claiming that NHS spending has been rising in real terms.

Upholding a complaint by Labour, the watchdog said the best-available Treasury data suggested that health spending had been lower in 2011/12 than in 2009/10, once inflation was taken into account.

At best, he concluded, because of the small size of the changes and uncertainties surrounding them, it might be fair to say spending had "changed very little".

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