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Spending Review: George Osborne to reveal £11.5bn in cuts Spending Review: Public sector staff to lose automatic pay rise
(about 2 hours later)
George Osborne is preparing to wield the axe in a fresh round of spending cuts that will set the tone for the next general election. Millions of civil servants will lose their automatic annual pay increase as part of an £11.5bn cuts package being unveiled by Chancellor George Osborne.
The chancellor is to unveil £11.5bn of cuts for a single financial year - 2015/16 - to help reduce the deficit. Mr Osborne said it was "deeply unfair" to public servants who did not get it and the private sector who paid for it.
Health and schools in England and foreign aid will continue to be protected, meaning other departments will have to take a bigger hit. The chancellor is setting out spending cuts for 2015/16 forced on him by slower than expected economic growth and deficit reduction.
Labour has said it will stick to the plans if it wins the next election. Labour has said it will stick to the plans if it wins the 2015 election.
Mr Osborne will outline the Spending Review in the House of Commons from 12:30 BST. Briefing MPs on the plans, which will kick in just before the election, Mr Osborne insisted the economy was on the right track, saying: "Britain is moving out of intensive care and moving from rescue to recovery."
BBC political editor Nick Robinson says there will be no fresh welfare cuts, but there will be more detail of a long-term plan to cap much of the benefits budget, including disability and housing benefit. And he said the cuts would be done in a fair way and would boost growth. Reforms such as ending "progression pay" in favour of performance-related increases would ease the pain.
Other measures tipped to be in the chancellor's statement include: "Progression pay can at best be described as antiquated; at worst, it's deeply unfair to other parts of the public sector who don't get it and to the private sector who have to pay for it.
The chancellor will also announce long-term plans to invest more in Britain's infrastructure in building roads, railways and housing. "So we will end automatic progression pay in the Civil Service by 2015-16.
"And we are working to remove automatic pay rises simply for time served in our schools, NHS, prisons and police.
"The armed forces will be excluded from these reforms.
"Keeping pay awards down and ending automatic progression pay means that, for every pound we have to save in central administration, we can better limit job losses."
He also warned of further job cuts in the public sector, as he unveiled a 10% budget cut for the department for communities and local government.
Health and schools in England and foreign aid will continue to be protected, meaning other departments are taking a bigger hit.
Government departments ranging from the Home Office and Defence to Communities and Local Government are facing average cuts of between 8% and 10%.
There will be no further cuts to benefits - but Mr Osborne is expected to announce plans for a long-term cap on welfare spending in his statement to MPs in the House of Commons.
The chancellor will also announce long-term plans to invest more in Britain's infrastructure in building roads, railways and housing, with full details to follow on Thursday.
The next general election is scheduled for May 2015 and the Conservative-Liberal Democrat coalition has to set out its budgetary plans for the final few weeks of its time in office, irrespective of the outcome of the poll.The next general election is scheduled for May 2015 and the Conservative-Liberal Democrat coalition has to set out its budgetary plans for the final few weeks of its time in office, irrespective of the outcome of the poll.
Labour has said that it would match the coalition's current spending totals for the full one-year period.Labour has said that it would match the coalition's current spending totals for the full one-year period.
On Sunday, Mr Osborne announced that the Ministry of Defence would have to shed civilian staff, but the UK's military capacity would not be affected.
The last department to reach a settlement on its budget was Vince Cable's Department for Business and Skills.
The agreements followed weeks of arguments with ministers.
The chancellor had initially hoped to eliminate the structural deficit - the portion of borrowing that is not affected by changes in the economic cycle - entirely by 2014-15.The chancellor had initially hoped to eliminate the structural deficit - the portion of borrowing that is not affected by changes in the economic cycle - entirely by 2014-15.
But the timeframe for this has slipped to 2017-18 and Mr Osborne will have to borrow £275bn more than he expected in this parliament than at the time of his first Budget in 2010.But the timeframe for this has slipped to 2017-18 and Mr Osborne will have to borrow £275bn more than he expected in this parliament than at the time of his first Budget in 2010.
The government says it has cut overall borrowing by a quarter since coming to power and by a third as a share of GDP.The government says it has cut overall borrowing by a quarter since coming to power and by a third as a share of GDP.
Revised official figures released on Friday showed that borrowing rose slightly to £118.8bn in 2012-13 from £118.5bn the year before.Revised official figures released on Friday showed that borrowing rose slightly to £118.8bn in 2012-13 from £118.5bn the year before.
Mr Osborne has indicated the coalition is determined to stick to its austerity plan, saying: "I'm confident we are coming out of intensive care and we can turn this country around. There's certainly a chance of a relapse if we abandon our plan."
Labour leader Ed Miliband said the coalition had broken its promise to clear the deficit and the British people were paying the price for its failure.Labour leader Ed Miliband said the coalition had broken its promise to clear the deficit and the British people were paying the price for its failure.
"They tell us the economy is healing in government but actually things are getting worse for ordinary families. What we actually need is a fairer plan to get growth moving, living standards rising and the deficit down." Speaking ahead of the chancellor's statement, he said: "They tell us the economy is healing in government but actually things are getting worse for ordinary families. What we actually need is a fairer plan to get growth moving, living standards rising and the deficit down."
He said the economy had "failed so badly" under the coalition that it would be "extremely tough" for Labour if it won the next election and it was "only responsible for us to promise to reverse cuts if we know exactly where the money is coming from" but the party would spend more on new infrastructure projects.
The government is due to set out its own plans to invest billions of pounds in transport, science and other capital projects on Thursday.