Letwin: Spending slowdown

Shadow chancellor Oliver Letwin has signalled that increases in public spending would slow dramatically under a future Conservative administration.

Following Labour's inflation-busting increases in public spending, the shadow chancellor said he would seek to reduce the rate of growth.

Ahead of a major policy announcement on Monday, Letwin vowed that increases in public spending would be lower than the rate of economic growth.

This approach would give a future Conservative administration a "dividend" which could be spend on debt repayment or tax cuts, he said.

Huge savings

In a speech on Monday, Letwin is likely to suggest that the Tories can save over £30 billion a year by pursuing the policy.

Interviewed ahead of the announcement, he said: The question is should public spending grow a little bit slower than the economy, because if it does then you have got a kind of dividend there, and you can distribute that dividend.

"We may have to distribute an awful lot of it I'm afraid in repaying Gordon Brown's borrowing, but anything remaining of course you can use for tax reduction."

Last week the Tories vowed to end the rapid increase in the number of new civil service posts.

Big freeze

He said over 500 new civil servants are being employed every week and vowed to freeze recruitment in Whitehall.

And whilst Letwin said the Conservatives would seek to reduce taxes, he refused to give any cast-iron guarantee.

"What I want to do is to have the growth in public spending be about one per cent lower each year than the growth of the economy, and that produces what I was describing as a dividend which is indeed by 2011, around
£35 billion a year," he told Breakfast with Frost.

"Now some of that, perhaps a large part of it unfortunately, will have to be spent on repaying Mr Brown's borrowing.

"I hope we will be able to give some early indication of tax reductions, but I don't know how big Mr Brown's borrowing problem is
going to be."