A pay freeze for Britain's six million public sector workers would be one of the least painful ways of rebalancing the public finances, the head of the country's independent spending watchdog said today.
Steve Bundred, chief executive of the Audit Commission, criticised politicians for not being honest about the need for cuts in spending and said health and education should not be excluded.
"At a time when inflation is likely to be between 2 per cent and 3 per cent, a pain-free way of cutting public spending would be to freeze public sector pay," he wrote in the Observernewspaper.
Britain's public deficit is forecast to reach £175 billion this year, more than 12 per cent of gross domestic product.
An election is less than a year away, and debate over how to curb the deficit has become a hot political issue.
The Labour government, trailing in opinion polls, has said the Conservatives would, if elected, make big cuts in public services. The Conservatives accuse the government of playing fast and loose with the public finances but have pledged to protect frontline services in schools and hospitals.
Mr Bundred said the real choice at the next election was on the balance to be struck between tax rises and spending cuts, and where they should fall.
"First, let's dismiss the notion that the choice facing voters next year will be between cuts and investment in public services," he said.
"Both parties know that savings are necessary and they may need to be greater than the mooted 10 per cent of current spending levels."
The government is hoping Britain will pull out of its deepest recession in 50 years by the end of the year, boosting voters' morale and making the budgetary arithmetic slightly easier.
The Audit Commission chief said the government would struggle to meet its borrowing targets even if the economy did pick up. The government has underestimated its funding needs for most of the past decade and public borrowing is now running at its highest level since the second World War.
"Even if the chancellor is right and the economy is in recovery by the end of the year, the Treasury's borrowing forecasts still look optimistic," said Mr Bundred.
Government bond issuance has risen to record levels and analysts fear further deterioration in Britain's fiscal credibility could push up debt servicing costs.
Mr Bundred said health and education workers should not be exempt from the austerity measures, particularly as they had done well over the past decade.
"In both there are efficiency savings available that will not affect service quality and not just in back offices," he said.
"Don't believe the shroud wavers who tell you grannies will die and children will starve if spending is cut. They won't. Cuts are inevitable and perfectly manageable."
Reuters