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Alistair Darling faces two competing pressures

Issue No. 2194

Labour chancellor Alistair Darling is caught between the baying of the City of London for brutal cuts in public spending and the need to win votes in the upcoming general election.

The result will be an attempt to hide the real scale of the pain ahead.

Labour has made much of its promise to protect “frontline services” in health, schools and police from cuts.

But less noticed is Darling’s announcement in the December pre-Budget report to halve the current budget deficit, currently at 12 percent of GDP, by 2014-15.

This will mean cuts on a scale that Margaret Thatcher failed to achieve.

Darling plans a four‑year freeze on public sector spending. Under Thatcher’s Tory government public spending rose by 0.7 percent in the 1980s.

The Institute of Fiscal Studies say Darling’s plans represent the biggest cut in public spending since the mid-1970s.

This may also underestimate the real scale of the cuts to come.

Darling assumes the deficit will fall by £25 billion as a result of the economy starting to grow again. The Treasury predicts the economy will grow by 3.5 percent in 2011.

But the European Commission thinks this is too optimistic a prediction and is demanding bigger cuts.

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Tue 23 Mar 2010, 19:30 GMT
Issue No. 2194
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