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UK Treasury asks departments to plan 40% cuts

world Updated: Jul 04, 2010 20:42 IST

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As Britain hopes to slash a record budget deficit, UK Treasury Department has asked cabinet ministers to plan for unprecedented cuts of 40 per cent in their departmental budgets.

The chief secretary to the Treasury Danny Alexander sent his proposal to cabinet colleagues ahead of a week in which ministers will step up emergency cost-cutting across the public sector.

The only departments not included in the Treasury trawl will be health and international development, which have been ringfencedfor the current parliament. Education and defence will also escape lightly, The Guardian reported.

Britain's deficit reached 156 billion pounds (USD 227 billion) in the fiscal year that ended in April and the government has indicated cuts of around 20 percent could be on the cards at many government departments.

A Treasury source said: "We are determined to tackle the record budget deficit in order to keep interest rates lower for longer, protect jobs and maintain the quality of essential public services. These planning assumptions are not final settlements, and do not commit the Treasury or departments to final settlements."

Alexander has told the education secretary, Michael Gove, and the defence secretary, Liam Fox, to plan for two scenarios – cuts to budgets of 10 per cent at best and 20 per cent at worst over four years.

All other departments – including the Home Office, the Department for Work and Pensions and the Department for Transport – have been ordered to produce plans showing the impact of cuts of 25 per cent, and at worst 40 per cent.

In addition, all departments have been asked to show how they would slash day-to-day administration costs, excluding salaries, by 33 per cent at the lower end and 50 per cent at the higher end.

The announcement of a 40 per cent outer limit could be seen as tactical – to prepare the public for the worst in the hope that when final details are announced they will come as less of a shock, the newspaper said.