BRITAIN: A key general election battle line was drawn in Britain yesterday as Labour and Conservatives clashed over government spending.
Shadow chancellor Mr Oliver Letwin insisted increases could be kept below the rate of economic growth without "slash and burn" cuts.
Cabinet Office minister Mr Douglas Alexander said the budget freeze he had proposed across much of Whitehall would mean "massive" reductions in public services.
However, both were pre-empted by a leaked government report identifying efficiency savings of up to £15 billion each year. Sir Peter Gershon, head of the government's efficiency review, has apparently proposed axing 80,000 civil servants to make the savings.
His confidential report goes further than Tory plans, announced last week, to freeze Whitehall recruitment.
The savings identified also appear to dwarf the estimated £35 billion that would be saved over six years under proposals outlined by Mr Letwin.
Mr Alexander said: "There's a world of difference between a serious review like the Gershon review and the kind of arbitrary freeze in civil service numbers and the the immediate real-terms cuts in departmental budgets that Oliver is proposing today." Mr Letwin said the report showed "there is a great deal of common ground between us if we only admit it".
"We both agree the state has to grow. We both agree it has got to grow more slowly than it has been growing," he said.
"But the question is can we find a way of making it grow slightly more slowly than the economy is growing? If we can have a sensible debate about that, then we can avoid these 'slash and burn' accusations which really don't get us anywhere."
Mr Letwin said investment in schools, hospitals and pensions would continue to rise in line with government plans, he said. However, all other areas would have a budget freeze.
This would mean an increase in the overall level of public spending, but at a rate below the growth in the economy - thereby reducing the share of the national wealth spent on the public sector.
Mr Letwin's "Medium Term Expenditure Strategy" would, over six years, reduce the proportion of GDP consumed by the public sector from 42 per cent to 40 per cent. However, Mr Alexander said that meant "immediate and massive cuts" across the public services. "We will be challenging Conservative candidates in every seat in the country now to explain to their electorate which school, which hospital, which police station will be closing as a result of the massive cuts that would be imposed by Oliver Letwin," he said.
The Tory proposals would require reductions in the budgets for the Home Office, defence and international development and would mean £2 billion of health spending being diverted from the NHS to private sector providers, he claimed.
Mr Robert Chote, director of the Institute of Fiscal Studies, said the proposed 2 per cent cut would only reverse around half the increase in public spending seen under Labour since 1997.
"However, part of the problem for the Conservatives is that within this overall envelope they have also said they want to spend a higher proportion of national income on schools and hospitals and at least as much national income as we do now on pensioners. So that means the savings have to come from somewhere else," he added.