Tories plan huge cuts in spending on young jobless

The Conservatives plan huge cuts in public spending on employment and training, according to Treasury papers released yesterday.

They open up clear blue water between the parties, with Labour committed to spending pounds 3bn more to get 250,000 unemployed young people back to work.

This is not a Tory priority: the Treasury figures suggest dramatic cuts in these programmes over the next three years. Its analysis of government-spending programmes up to 2000 shows a real-terms cut in the education and employment budget from an estimated pounds 14.4bn last year to pounds 12.9bn (at 1995-96 prices). That represents a cut of more than pounds 1.5bn in real terms, nearly 11 per cent of last year's budget.

The department's annual report, published on the eve of Parliament's break-up for the election, also shows a 15 per cent cut in the cash allocation for the budget "to help unemployed people into work" up to the end of the century.

Another cash cut, of almost 7 per cent, is shown in the proposals "to enable children, young people and adults achieve skills and qualifications at the highest standard of which they are capable ..."

The contrast between the Conservative plans for cuts and the shadow Chancellor's proposal to raise pounds 3bn through a windfall tax on the excess profits of privatised utilities, to finance his "welfare to work" programme, could not be clearer. But the spending plans also suggest that a lot of the money raised by the new tax would be needed simply to maintain present services.

Meanwhile, with new trade figures providing a much-needed fillip to a flagging Tory campaign yesterday, Kenneth Clarke, the Chancellor of the Exchequer, said: "This boom is not a consumer bubble."

John Major said in a statement that Labour was proposing higher spending, new taxes, the European Social Chapter, a minimum wage, and new union rights.

"This is the way to wreck people's hard work over many years," he said. "Britain is booming. Don't let Labour blow it."

The Chancellor added: "It takes clear decisions to make sure that boom never again goes back to bust." But he was careful not to promise that there would never again be a recession under a new Conservative government.

Asked whether he was making such a pledge, he told The Independent: "The key thing in a market economy, where you have an economic cycle, is that you have to create as stable conditions as you possible can.

"Getting the decisions right isn't just a question of flying by the seat of your pants; it actually has to depend on a framework of policy, clearly thought out."

The Chancellor issued a number of challenges to Mr Brown, including a call for the Labour Party to guarantee that its proposed July budget would not increase the tax burden.

Offering their own "guarantee", the Tories said: "We will not increase the tax burden in 1997-98 above the figures set out in our existing plans - 36.25 per cent of national income."

However, when asked if he would give a pledge not to increase the tax burden over the lifetime of another Conservative government, the Chancellor did not reply.

His own Budget Red Book said that this year's tax burden of 36.25 per cent - compared with the 34.75 per cent of 1978-79 under the last Labour government - would increase to 36.5 per cent next year, 37.25 per cent in 1999-2000, 37.75 per cent in 2000-01, and 38 per cent in 2001-02.

Yesterday's Treasury analysis of spending programmes also showed cuts of more than pounds 1bn each, in real terms, in the budgets for local government, Scotland and housing - which is to be slashed back from pounds 8,759m in 1992- 93 to pounds 4,577m, in real terms, by 1999-2000.

Plans for the Department of Health show total spending in 1999-2000 that is lower than last year's in real terms.

If National Health Service spending increases by 1.5 per cent this year and much smaller amounts in the next two years, as was indicated in last November's Budget, the figures point to implausibly Draconian real cuts of nearly 80 per cent in other departmental expenditure.

Pamela Meadows, director of the Policy Studies Institute, said: "The Department of Health figures are deeply implausible. I don't see how the Government can keep a straight face presenting these plans."

She said that although previous sets of public expenditure plans had shown real-terms cuts in later years, departments had never taken them terribly seriously.

"Gordon Brown would be the first person to treat them as more than a starting point for discussion," she said.

Speaking at the Tories' election press conference, Mr Clarke claimed that the best balance of payments figures for a decade showed that the economy was not running into the problems that had turned past booms into bust.

Mr Brown said last night that new figures, due out today, would show a fall in manufacturing investment of 8 per cent last year - further evidence of the inbuilt weaknesses of Conservative economic policies.

A record surplus on "invisible" trade nearly offset a deficit on trade in goods last year, giving the smallest balance of payments shortfall since the North Sea oil bonanza of the early Eighties.

The unexpected improvement was mainly derived from the high profits made by British firms investing overseas, with United Kingdom investment abroad running at about twice the rate of foreign investment in Britain.

City economists welcomed the news but were cautious about the outlook because the strong pound has reduced the size of the import bill before its effects on export volumes have showed up in the figures.

A large majority of analysts are expecting an increase in interest rates shortly after the general election to cool the economy down.