By Lucy Phillips
18 May 2010
The new government has ordered a review of all spending decisions taken by the Treasury this year in an early move to rein in public spending.
Chief Secretary to the Treasury David Laws has asked all secretaries of state to examine the financial viability of every government project and pilot scheme approved since January 1. Anything that is considered to be a waste of money will be dropped while initiatives deemed worthwhile will have to be resubmitted to the Treasury for budgetary approval.
The announcement came after it emerged that Laws had been left a note by his predecessor, Liam Byrne, saying simply: ‘I’m afraid to tell you, there’s no money left’. Laws also claimed in a television interview last night that the previous government had taken spending decisions against the advice of their own accounting officers. On the same day Chancellor George Osborne criticised the accuracy of Treasury figures under his Labour predecessors.
But Colin Talbot, professor of public policy at Manchester Business School, accused the new Treasury chiefs of political spin by claiming the situation was worse than they thought. He said this could lead to ‘nasty consequences’ for the markets, highlighted by a brief tumble in sterling yesterday.
‘I think George Osborne is going to have to learn as chancellor that the political knockabout he seems to be happy to indulge in can have serious effects on the markets if you are not careful.’
He added that the UK government’s finances were properly audited and no figures, apart from economic forecasts, had ever been challenged – unlike in Greece. ‘If people are worried that the British books are like the Greek books and don’t tell us the truth about the public finances and the chancellor says that’s true, it’s really dangerous stuff and clearly not true,’ he said.
Osborne and Laws also revealed yesterday that they will set out next week how £6bn of spending cuts will be achieved this year – a central pillar of Tory policy, which the Liberal Democrats consented to in the coalition agreement. The Bank of England has now backed the plan to begin tackling the deficit this year – opposed by Labour, which said it would damage the UK’s recovery from recession.
Laws said: ‘The chancellor and I are united in our resolve to deal urgently with the unacceptable state of our public finances... By making an early down payment we are not only helping to reduce the deficit faster, we’re sending a clear and strong message that we intend to do what’s needed to repair our public finances and get our economy moving again.’ He added that the cuts would be made without affecting the quality of ‘priority’ frontline services.
But Talbot said cutting £6bn immediately was ‘a very nice political virility symbol by the new government’ but ‘extremely dangerous’ because the economy was still in a fragile state.
The devolved administrations have been given the option of deferring their contributions to the £6bn savings until next year because their spending plans for the rest of this year have already been approved.
