The government hopes to trim public-works spending by at least 3 percent in the fiscal 2006 budget, the same modest cost cuts made for this fiscal year, according to budget compilation guidelines submitted Wednesday to Prime Minister Junichiro Koizumi.

The negotiations with the ruling coalition over the next budget are currently on hold due to political wrangling over the postal privatization issue, which led to the Monday dissolution of the House of Representatives and the announcement of a Sept. 11 general election.

According to the budget guidelines, it wants to cut public works expenditures in fiscal 2006 by demanding efficiency and strategic planning.

It also aims to secure fair and transparent bidding by contractors, since many business leaders have acknowledged that bid-rigging has become ingrained.

Heizo Takenaka, state minister in charge of economic and fiscal policy, later told reporters he does not believe the cuts will hurt the economy.

“The macroeconomic situation is for the most part in keeping with our scenario,” he said. “I believe these guidelines are in line with the economic situation.”

The 3 percent reduction target is the same level set by the government in the fiscal 2005 budget.

The government will place further “stringent checks” on unnecessary social-security costs, to keep spending from exceeding the pace of economic growth, the guidelines said.

The previous day, Koizumi said social-security costs, expected to grow about 800 billion yen as the population ages, need to be reined in by some 200 billion yen, as in the current fiscal year.

The Cabinet is slated to approve the guidelines Thursday, and government ministries and agencies are preparing to submit their budgetary requests to the Finance Ministry by the end of the month.

The government is expected to create a separate set of guidelines this fall to cut public servant salaries both in the central and regional governments.

The cuts stipulated in Wednesday’s guidelines are modest compared to the mounting national debt, which is currently the highest among industrialized countries, according to critics.

However, Finance Ministry officials have said steeper spending cuts have been politically difficult to push forward.

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