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Political Parties of All Stripes Must Make a Serious Effort to Cut Major Areas of Expenditure

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To give the Chancellor credit, there is now no serious politician arguing that we don't need to reduce the deficit and find a way to run a balanced budget again in the long-term. Given we are spending almost as much this year on debt interest as we are on education, that is something to be thankful for.

The challenge for the government is that growth forecasts have been overly optimistic. Since they came to power the economy has staggered along the bottom and so although the deficit has been reduced by around a third, in order to meet his targets George Osborne has had to find an additional £11.5bn of savings.

The difficulty today has been to face the immense task of reforming public spending whilst straight-jacketed by ring-fences around certain area of spending.

Health, schools, foreign aid and welfare - these are some of the areas that saw rapid increases in their budgets under Labour. They have fuelled a ballooning state and contributed to declining productivity in the public sector. Without serious reform it is hard to see how the UK can credibly run balanced budgets over the long term.

Although ring-fences might be an effective short-term political gimmick, the electorate want more than anything to feel the positive effects of economic growth again. Ultimately political parties of all stripes need to realise this and make a serious effort to reduce these major areas of government expenditure.

Mr Osborne started his statement by saying that cutting spending does not need to mean a decline in the quality of services. But he didn't see this through. He needs to be brave enough to ask questions about how to get more private sector investment into these areas - to examine options like privatising the road network, and encouraging companies to open free schools that make a profit.

There was an entire section of the spending review focused on enterprise. However it made no mention of how government could make it easier for businesses to expand; simply how government could focus more taxpayer funding in this area. There was a glaring absence of any attempt to promote enterprise through tax reductions or planning deregulation.

Similarly the focus on trying to redirect some funding towards capital expenditure shows a failure to learn many of the lessons of the last few years. High Speed 2's budget has been revised upwards today, showing yet again that government is just about the worst judge of which infrastructure projects are likely to be a commercial success. It is likely some of the funding announced today will end up supporting the expansion of wind power, pushing up consumers' energy bills in years to come.

Growth remains sluggish, we are still spending well beyond our means and the limited reductions we have seen are based on salami slicing rather than proper reform. We need to implement a substantial and strategic review that radically alters the balance of spending in Britain away from the public sector and allows us to build an economy driven by enterprise.

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