Whitehall falls in line as Osborne cuts hit £11.5bn

GEORGE Osborne yesterday declared that the UK economy is “out of intensive care” as it was revealed that all Whitehall departments have agreed to budget cuts.

The chancellor also confirmed that the Tories could look to remove universal benefits from wealthy pensioners after the 2015 general election.

Osborne is due to unveil £11.5bn of cuts to departmental budgets for 2015-16 on Wednesday as part of his spending review. Business secretary Vince Cable, who had been the last minister holding out against cuts, finalised his settlement with the Treasury last night. It is understood the Lib Dem was not happy with reports over the weekend that he could be made to appear in front of a so-called star chamber of fellow ministers to make the case against the proposed level of cuts.

“This is about achieving a good credible settlement on growth,” a source close to Cable told City A.M. “This is not about manoeuvring or grandstanding, it is about the future of the country.”

Osborne yesterday confirmed that his settlement with the Ministry of Defence will see a reduction in the number of civilian staff but no cuts to military capability. The chancellor is also preparing to unveil caps on some parts of the welfare budget, as well as long-term infrastructure programmes.

“I’m confident we are coming out of intensive care and we can turn this country around,” Osborne told the BBC’s Andrew Marr show. “There’s certainly a chance of a relapse if we abandon our plan.”

Osborne’s suggestion that the Conservatives could increase the pension age and remove benefits such as the winter fuel payment from well-off retirees brings him into line with Labour and could herald an end to the principle of universal welfare.

Meanwhile shadow chancellor Ed Balls suggested he would consider increasing short-term borrowing to fund capital projects if his party wins in 2015.