Osborne pledges deficit cut that 'unites country'

Chancellor George Osborne yesterday pledged to cut the burgeoning budget deficit in a way that "strengthens and unites the country".

In the final day's debate on the Queen's Speech, Mr Osborne said a deficit reduction plan was "unavoidable" after borrowing rocketed under Labour. But he insisted the task of reducing it and clearing up the inherited "mess" would be conducted in a way that sought to take the whole country along with the Government.

While major savings had to be made the impact would be limited as far as possible for the most vulnerable and regions heavily dependent on the public sector.

Earlier, Mr Osborne said politicians, trade union leaders and members of the public were all invited to engage in the debate on how to cut the budget deficit and ensure Britain lives within its means.

Britain faced a "serious national challenge" and ministers wanted to ensure that all political parties, "the brightest and best brains across Whitehall and the public sector," voluntary groups, thinktanks, unions and members of the public "are all engaged in the debate and the discussion about how collectively we deal with the problem".

Mr Osborne said the Budget in a fortnight's time needed to address the immediate economic difficulties and begin the long term task of moving from an economy based on debt to an economy "where we save, invest and export" in the future.

Mr Osborne said the economy had become "deeply unbalanced" under Labour with the country borrowing £156 billion a year. He disclosed that the new Office for Budgetary Responsibility would produce its first independent assessment of "the growth forecast and other forecasts" next Monday. And he confirmed the Government was determined to press ahead with a bank levy "because the banks should pay some contribution to clearing up the mess they helped to create".

He said the Government would set out plans to reform the welfare system and "restrain" the cost of public sector pay and pensions.

It would also undertake a "fundamental review of spending plans" on capital spending, he said, adding: "We've inherited a capital budget that is set to halve."