Magazine article Public Finance

Public Sector 'Efficiency' Will Help Pay for Tax Cuts

Magazine article Public Finance

Public Sector 'Efficiency' Will Help Pay for Tax Cuts

Article excerpt

The public sector is set to face increased demands for efficiency savings to make up for the chancellor's Pre-Budget Report tax handout.

Economists have warned that a 'squeeze' on the public sector would follow borrowing to finance the £500bn banking bail-out, with the independent Institute for Fiscal Studies noting that this would be a question after the next election'.

Chancellor Alistair Darling is expected to announce the tax cuts in his PBR speech on November 24, following Prime Minister Gordon Browns urging of a similar 'fiscal stimulus' policy on his international counterparts at the G20 summit.

Darling is also expected to flesh out his plans to 'bring forward' planned public sector spending on infrastructure projects, although this could be limited by the technical and financing difficulties of speeding up complex procurements.

But a crucial element of the PBR will be Darling's plans for returning public sector borrowing to a 'sustainable' level when the economy recovers. In his October 29 Mais lecture, the chancellor promised that the PBR would our commitment keeping the public finances a sustainable path' and ensuring that we Uve within means in the medium term'.

A new round of Gershon efficiency savings is expected to form part of Darling's remedy after being heavily trailed by senior government figures. The chancellor will report on Chief Secretary to the Treasury Yvette Cooper's review of the Gershon programme. Cooper told the Cabinet this week that the programme had saved £26.5bn over the past three years - £5bn than the original target.

Speaking ahead of the PBR, Darling told the BBC: 'We need to be more efficient and we will be more efficient We are already exceeding the targets we set ourselves for government spending, in making ourselves more efficient and cutting back on waste. I think we can do a lot more and on Monday, at the Pre-Budget Report I will be setting out what more I think we can do.'

The public sector will also face a squeeze in the next two to three years if the Conservatives are returned to power after the next general election.

Tory leader David Cameron set the ground for the PBR debate with an attempt to put clear blue water' between his party's policy for tackling the economic crisis and that of the Labour government publicly ditching the Conservatives' commitment to keep to Labour's spending pledges. …

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