Government to audit spending amid budget concerns

LONDON Sun May 16, 2010 5:59pm BST

Prime Minister David Cameron is interviewed by BBC journalist Andrew Marr in his official residence of 10 Downing Street in London May 16, 2010. REUTERS/Jeff Overs/BBC

Prime Minister David Cameron is interviewed by BBC journalist Andrew Marr in his official residence of 10 Downing Street in London May 16, 2010.

Credit: Reuters/Jeff Overs/BBC

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LONDON (Reuters) - The new government will launch an independent audit of public spending next week, Prime Minister David Cameron said on Sunday, as several senior cabinet members expressed concern about budget 'black holes.'

Tackling a record budget deficit running at more than 11 percent of GDP as the country makes a so far anaemic recovery from recession is the major challenge for the government.

The Conservatives joined forces with the Liberal Democrat party after a May 6 parliamentary election to form the country's first coalition since 1945, ending 13 years of Labour Party rule.

Cameron, who said the government would publish a detailed coalition agreement within the next two weeks, reiterated that action to cut the deficit should focus on spending cuts rather than tax rises.

"We will have a proper independent audit by the Office of Budget Responsibility of the black hole that we face," Cameron said in a BBC interview, adding the audit of spending would be launched by finance minister George Osborne on Monday.

The Sunday Times newspaper said several ministers, including LibDem Business Secretary Vince Cable, had expressed concerns about the true state of the public finances after finding black holes in their departmental budgets.

"There are some worrying early signs that numbers left by the outgoing government may not add up," the paper also quoted Cabinet Office Minister Francis Maude as saying.

"It certainly doesn't make the task of reducing the structural deficit any easier."

"OVERWHELMING" SUPPORT

The two parties set out an initial coalition agreement on Wednesday, covering decisions in key areas such as the economy, and subjects on which they have radically different views such as immigration, defence and Britain's relations with Europe.

"We need a fuller coalition agreement covering other policy areas as well," Cameron said on Sunday. "There will be a longer form document out in the next couple of weeks."

Former LibDem leader Charles Kennedy wrote in the Observer newspaper he had not backed the agreement because he was worried the party would lose touch with its fundamental values and be swallowed up by the Conservatives.

While some activists had also expressed concern the party was abandoning its core values, the coalition agreement received the "overwhelming" endorsement of party members at a special conference to debate it on Sunday, a Lib Dem spokesman said.

"I know the stakes are high," LibDem leader and Deputy Prime Minister Nick Clegg said in a statement following the vote. "But I came into politics to change things and that means taking risks ... it would simply be wrong for us to let this chance of real change pass us by."

While the vote, which came as two polls suggested some Lib Dem supporters had switched to the opposition centre-left Labour Party, would have had little immediate impact on the coalition, the backing of his wider party will be a relief to Clegg and help stem questions about its longevity.

Cameron has insisted the LibDems will play a central role in government and while he acknowledged both parties were likely to lose some supporters as a result of the partnership, he said the coalition's actions would prove it was the right decision.

"If we can demonstrate that we are gripping the deficit, that we are succeeding in Afghanistan, that we are solving the country's social problems ... then that is the best way of proving to either a disillusioned Conservative or a worried Liberal Democrat that it is a good thing," he said.

Asked about speculation the government would raise the Value Added sales tax by 2.5 percentage points to 20 percent, he said it was not something they planned to do but a decision would have to wait for an emergency budget due in the next few weeks.

In a sign of his intention to rein in spending on public sector pay, Cameron -- whose cabinet this week agreed to a 5 percent pay cut -- said bonuses paid to senior civil servants and health service managers would be reduced by two-thirds for 2010/11, saving around 15 million pounds.

"From the large to the small, we are going to take action," he said.

(Editing by Jon Boyle)

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