Road plans shelved by savage cut in spending: The pressure on public expenditure

PARTS OF the pounds 12bn road building programme are to be 'put on ice' in the most savage round of public spending cuts in a decade. Published spending plans are being slashed, opening new divisions in the Cabinet over what should be protected.

Ministers yesterday confirmed that the Cabinet committee reviewing the public expenditure cuts has ordered reductions in some of the base-line figures for some departments, on which the Tories fought the election.

Some senior ministers on the Cabinet committee on public expenditure, known as the EDX committee, chaired by Norman Lamont, the Chancellor, have been arguing for capital spending on the infrastructure to be protected to create jobs and stimulate the economy. They include Kenneth Clarke, the Home Secretary, and William Waldegrave, the minister responsible for the Citizen's Charter.

But after the Cabinet committee meeting on Friday, some ministers protested that capital spending, such as the roads programme, was being cut.

Ministers want to impose severe restraint on public sector pay rises to preserve capital schemes, such as roads, hospital building and some defence contracts. One minister said: 'This is the time to be tough on pay.'

The Cabinet committee was given a range of illustrative figures presented by Michael Portillo, the Chief Secretary to the Treasury. 'Spending on the infrastructure is not being given any special protection,' another minister said.

Those defending capital programmes are being forced to make cuts because of the growth in pounds 71.2bn social security programme. Peter Lilley, the Secretary of State for Social Security, is a Thatcherite, but has defended his need for more money on the grounds that his department has a statutory duty to increase spending to meet rising unemployment and other benefits.

Mr Portillo is seeking to cut eligibility for unemployment benefit from a year to six months and other ministers are demanding more savings on welfare benefits. One minister said: 'We ought to look again at reducing the numbers who get child benefit.'

Malcolm Rifkind, the Secretary of State for Defence, is also fighting a rearguard action to preserve his baseline figure of pounds 24.5bn agreed last autumn for 1993/94.

John MacGregor, the Secretary of State for Transport, is faced with losing some of the money he was allocated by the Treasury in the Autumn Statement last year. It will mean part of the pounds 12bn roads building programme outlined in the White Paper Roads for Prosperity will have to be delayed.

'John MacGregor will describe that as necessarily deferred in the national interest. Some work will go ahead but a substantial part of the programme will be put on ice,' one ministerial source said.

The prospect of road pricing and a carbon tax to curb pollution and congestion will be raised in a 'green' policy paper to be published on Thursday by Michael Howard, the Secretary of State for Environment. But ministers said it did not mean the Government was surrendering its commitment to the 'great car economy'.

The Treasury is seeking a 15 per cent cut in the overseas aid budget from Baroness Chalker, the Minister for Overseas Development, which Michael Meacher, the Labour spokesman, attacked as 'morally repugnant'.

The pressure to cut back on the published plans has been intensified by the Treasury's need to show financial discipline now that sterling is outside the exchange rate mechanism.

Ministers are also coming to terms with the new system of financial control imposed in July, when the Cabinet agreed to stick to the global spending total of pounds 244.5bn for next year.

It has meant that for the first time in years published plans are having to be reduced with real cuts in some departments.