MAJOR SPENDING cutbacks, including a pay-freeze for four million public workers, a higher pension age and sharp reductions in the cost of running central government have been promised by the Conservatives.
Pledging to end the United Kingdom’s culture of debt, Tory shadow chancellor George Osborne said he would act “decisively” to reduce the UK’s deficit, but also to protect key services.
The speech to the party’s Manchester conference is regarded as a key element of the Conservatives’ campaign to win command of the debate about Britain’s economy in advance of next year’s general election.
However, the commitments, worth £23 billion (€24.8 billion) over the next five years, will not deliver short-term savings to cut the UK’s rapidly growing deficit, which could hit £200 billion this year.
“Conservatives have been straight with you today. These are the honest choices in the world in which we live and we have made them today.
“Anyone who tells you these choices can be avoided is not telling you the truth,” he said.
“We must move this economy from one built on debt to one sustained by saving and investment. The Government borrowed too much. The banks borrowed too much. Let’s tell the truth – we all promised too much,” he told the conference.
Under current British plans, the retirement age for men is to rise from 65 to 66 in 2026, while the women’s pension age, which is set at 60 today, is to rise gradually from next year to reach 65 by 2020.
Women now older than 54 and men older than 58 will not be affected.
Politicians had to show example, Mr Osborne said, as he announced that the Tories would cut ministers’ pay next year by 5 per cent and then freeze it for the lifetime of the next parliament. The number of MPs would fall by 10 per cent, he said.
Repeatedly using the phrase “we are all in this together”, Mr Osborne tried to soothe fears about the Tories held by public sector workers: “Conservatives should never use lazy rhetoric that belittles those who are employed by the Government . . . No one should pick on public sector workers. I will not ask them to make any sacrifices or shoulder any burden that the rest of Britain is not being asked to make,” he said.
But, he said, a pay-freeze will be necessary to save 100,000 state jobs. Every public servant, bar the one million earning below £18,000 and soldiers serving in Afghanistan, should accept a one-year pay freeze from 2011.
This would save £3.2 billion a year from then on. No existing pay deals would be affected and the low-paid would get a 2.4 per cent rise in that year.
The Tories also pledged to stop increases in the public pay bill caused by promotions.
The cost of “running Whitehall” – British central government – should be cut by a third over the next five years, saving £3 billion-a-year, though the decisions on where the cuts would be made would be a matter for top civil service management.
State pensions to top employees should be capped at £50,000 a year, he said, while the existing generous MPs pension should be closed to new members, while no State employee should be paid “more than the prime minister”.
Tax credits for families earning more than £50,000 a year would be ended and the Child Trust Fund, under which the government gives each child a £250 voucher to start a trust fund that can be cashed in at 18, would be limited to the poorest third in society. Child benefit will be preserved as a universal benefit and the party would not axe the winter fuel payment or free TV licences for pensioners.
Bankers were warned not to over-pay themselves, or deny credit to customers unreasonably: “I have given you fair warning. For I believe in a free market, not a free ride,” he said, hinting at a windfall tax similar to the one the Tories introduced in 1981.
Tax credits would be withdrawn from any households earning more than £50,000 a year, and reduced for those earning between £40,000 and £50,000 – which would save £400 million a year, though it risks unpopularity with the middle classes.
Mr Osborne said the Conservatives would reverse Labour’s tax on pension share dividends which is blamed for hitting the value of pension funds – but not until the latter part of the next parliament.