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Budget raises prospect of looser squeeze on public spending

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Councils could face smaller funding cuts than previously anticipated this parliament after the government more than halved its planned cuts to public services.

In his Budget speech this afternoon, chancellor George Osborne announced that the government now planned to run a budget surplus by 2019-20, rather than 2018-19 as proposed by the coalition Budget in March.

The Office for Budget Responsibility said this meant the government now needed to find £17.9bn cuts to public service spending by 2019-20, less than half of the £41bn implied by the March Budget.

Its budget analysis said the new government had loosened “significantly the impending squeeze on public services spending” financed by welfare cuts, net tax increases and three years of higher government borrowing.

“On the basis of these provisional plans, the forthcoming spending review would be a lot less challenging than it appeared in March,” it said.

The comprehensive spending review, which was confirmed by the chancellor today, will be published in the autumn and will give details of how cuts are to be applied between government departments.

In his speech to the Commons this lunchtime, Mr Osborne pledged that in no year of the current parliament would cuts be as “deep” as those in 2011-13 and 2012-13.

He said the government would achieve a reduction in national debt in every year of this parliament but “without a rollercoaster ride in public spending”, a reference to the OBR’s assessment of the March Budget.

He reiterated the Conservative manifesto pledge to provide £8bn additional funding for the NHS, which he described as the government’s “priority”.

The chancellor also committed to increase the defence budget in real terms in every year of this parliament, a move that will mean other unprotected departments including the Department for Communities & Local Government may have to bear more cuts.

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