Born Again Thatcherites are preaching fiscal austerity to the unconverted

George Osborne's dedication to fiscal masochism is overlooking the markets' worries about growth.

As the Conservative-Liberal Democrat coalition embarks on Margaret Thatcher's Economic Experiment Part Two, and Lloyd George, Roy Jenkins and the departed members of the generation of "wet" Conservatives turn in their graves, I am occasionally asked whether I regret having been so hostile to Thatcherism, Mark One. The answer remains a resounding "no".

When the subject was raised the other evening, there came to mind a conversation I had with a former cabinet minister after the fall of Thatcher in 1990. He was a senior figure, and certainly not in the wet bracket with my friends Ian Gilmour, Peter Walker and Jim Prior. "She must be suffering," I ventured. My interlocutor stared hard at his lunch and picked up his glass. "Yes," he replied, "but is she suffering enough?"

This particular politician had once been a believer but was horrified by the extent of the social damage. It had not been as easy as he thought to reform the public sector without pain; and the simple monetarism he had espoused turned out to be seriously flawed. Now, it appears, it is a case of "here we go again", with our new chancellor congratulating himself in public for "taking the necessary courageous action".

Departments told to draw up plans for 40% spending cuts

The Treasury has told most government departments to prepare "illustrative plans" to cut spending by 40% - as well as the expected 25% - within the month.


Education and defence have been given some protection, and must produce plans to cut 10% and 20%. International aid and health budgets are being protected.

The full 40% plans are unlikely to be implemented but will inform future decisions on cuts, the BBC understands.

Labour says the news will raise fears about the future of frontline services.

'Swingeing cuts'

The government says cuts are needed to reduce the UK's £156bn annual budget deficit - the amount it must borrow each year to plug the gap between public income and spending.

However, public sector unions are threatening "co-ordinated industrial action" if ministers try to implement cuts as deep as 40%.

BBC political correspondent Gary O'Donoghue said ministers were told by the Treasury at a cabinet meeting in Bradford last Tuesday to draw up what are being called illustrative plans, and have them ready by the end of July.

Sources have stressed that Labour's pre-election plans had already implied cuts of 20% around Whitehall, he said.

Budget 2010: Britain on 'road to ruin' without cuts

Britain is "on the road to ruin" unless action is taken in the Budget on Tuesday to cut the deficit, Chancellor George Osborne has told the BBC.

Mr Osborne said the coalition had inherited "a truly awful financial situation" and he would set out a four-year plan to deal with it.

Tough action was "unavoidable" but he aimed to provide "prosperity for all".

He also announced ex-Labour minister John Hutton would head a commission into public sector pensions.

Mr Osborne told the BBC's Andrew Marr Show that Mr Hutton's involvement would mean the commission into future pensions would be independent and have cross-party input.

The introduction of so called 'free schools'

As the Government create a 'free school' system for all middle class parents to set up in their own large homes. So under the new plans as tax payers we will be paying for individual parents and children creating their own schooling structure and content.

In the times of spending cuts, is this the most cost effective way of schooling and teaching our children. I guess the really question will be the cost per student. Will each child get an individual laptop / computer, how about day trips, parents currently have to pay a contribution will this continue under this 'Private free  school' system.

So the government is privatising the education system, as the so called 'free school' systems starts private business can start running Britain's education systems. So just think your child could soon be going to your local Coca Cola academy or your local Starbucks education centre.

Government sets out how to establish 'free schools'

The government in England is setting out how parents, teachers, charities and other groups can apply to set up their own "free school".

Free schools will be independent but funded by central government.

Ministers will launch an online guide saying groups must set out demand from parents, the school's aims, curriculum, teaching methods and possible sites.

The National Union of Teachers (NUT) says the policy will create "chaos" at a local level.

The free schools policy is one of the two key plans set to change the shape of England's schools system.

Fiscal watchdog downgrades UK growth forecast

The new independent fiscal watchdog has downgraded the economic growth projections for the UK economy.

The Office for Budget Responsibility (OBR) predicts the economy will expand 2.6% in 2011, down from the 3% to 3.5% estimate given in Labour's last Budget.


The lower figure will likely increase the impetus of the coalition government to cut public spending, as lower growth means fewer tax revenues.

Yet the OBR also says the deficit and debt will not be as bad as forecast.

It predicts that the UK's public deficit will fall, down to 10.5% of GDP in the 2010-11 financial year, from the 11.1% estimated by Labour.


For overall net government debt - the sum of all borrowing - the OBR estimates this will decline to 62.2% of GDP in 2010-11 from the previous estimate of 63.6%.

Former Labour Chancellor Alistair Darling said the OBR figures "show that borrowing will be less than I forecast, so the government doesn't have the excuse to raise VAT, which it is planning".

He added that if the government cuts public spending too aggressively it could send the UK into a double-dip recession.

However, the OBR says the structural deficit - the part of the deficit that is not automatically reduced by economic growth - will widen from Labour prediction of 7.3% of GDP in 2010-11 to 8%.

This is the most difficult part of the deficit to tackle, and Chancellor George Osborne said the OBR figures "couldn't be clearer".