£5bn cuts just the beginning as Danny Alexander finds new black hole

Cuts: The news come days before George Osborne's emergency Budget
12 April 2012

Spending was slashed today on billions of pounds worth of projects from Stonehenge to hospitals and jobs schemes in a grim taste of the cuts to come.

Danny Alexander, the Treasury minister in charge of savings, cancelled £2billion of Labour promises and suspended schemes worth £8billion.

In a Commons statement, he said he had discovered a further £9 billion "black hole" in the country's finances, caused by other pre-election pledges that were not properly funded.

Cancelled spending includes a £25 million visitor centre at Stonehenge, a nuclear power-related £80 million loan to Sheffield Forgemasters, walking routes promised by the Health Department and improvements to a hospital in Teesside.

Cash to regional development agencies and councils was stopped. The biggest cut was the axing of Labour's jobs guarantee for young people, saving more than £1 billion.

Mr Alexander swung his axe for the first time before next week's Budget when the Chancellor, George Osborne, is expected to outline plans for much greater reductions in the autumn comprehensive spending review.

The projects, all promised by Labour in its final months, were identified as being poor value or a bad priority. Ministers went on a "pre-election spending spree in the full knowledge that the government had long since run out of money", Mr Alexander told MPs. A dozen other pledges, worth £8.5 billion, have been worth £8.5 billion, have been suspended pending the spending review. At least £1 billion of the "unfunded" pledges will be cancelled but these were not identified.

"As a result of the poor decisions made by the previous government, I have taken the decision to cancel certain projects that do not represent good value for money," said the minister.

Labour was furious, with MPs crying "shame" as he listed the cuts. Shadow treasury spokesman Liam Byrne raged: "The whole country will be aghast with his attacks on jobs, construction workers, industry and even hospitals."

Today's cuts come ahead of George Osborne's first Budget on Tuesday which will set out more measures to reduce the £155 billion deficit.

The Chancellor this morning declared that cutting back was "absolutely crucial".

"The job of the Budget is to show not just the international investors but our own population that we can live up to the challenge, that we can deal with our problems," he told BBC radio. "In a series of decisive measures, I think we can show this country can live within its means.

"If we can't, then the recovery will stall, interest rates will go up, businesses will go bust, more people will be unemployed."

Mr Alexander was given the task of reviewing spending and leading the CSR. The Chief Secretary was a controversial appointment after the resignation of David Laws but insiders say he has impressed with his dogged pursuit of waste. In a small number of cases, Labour's pre-election spending pledges were made against the advice of officials, according to sources.

He has ruled that spending pledges for the war in Afghanistan and made as part of the Northern Ireland policing and justice agreement, a key part of the peace process, will be exempt from cuts of programmes regarded as under funded.

Mr Alexander conceded to MPs that the cuts could harm jobs.

But former chancellor Alistair Darling accused the coalition of exaggerating the problems and looking for excuses to put up VAT in Tuesday's Budget.

Former business minister Pat McFadden said the Sheffield Forgemasters loan cut was "an appalling decision" that could wreck hopes of making Britain a key world player in civil nuclear power.

The TaxPayers' Alliance pressure group welcomed the cuts. Matthew Elliott said: "This may be controversial but large-scale spending cuts must be made as soon as possible."

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