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Britain slashes public spending for election year

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(Globalpost/GlobalPost)

Finance minister George Osborne on Wednesday unveiled more painful public spending cuts that will start in April 2015, one month before Britons are due to head to the polls for a general election.

Osborne, a key Conservative member of a coalition administration alongside junior partners the Liberal Democrats, vowed "no let up" as he fleshed out his deficit-slashing plans before parliament.

Chancellor of the Exchequer Osborne said the government would cut spending by £11.5 billion ($17.7 billion, 13.6 billion euros) for the 2015/2016 financial year, which largely follows Britain's next national election.

Britain is committed to more austerity, as the opposition Labour party has already pledged to stick to the coalition's spending plans, should it win the polls due in May 2015.

"The action we have taken together with the British people has ... taken our economy back from the brink of bankruptcy," he said in reference to austerity measures implemented since taking office in 2010.

"Britain is moving out of intensive care and from rescue to recovery... Today we announce the latest action to secure the recovery."

Osborne added that Britain needed to act to combat the impact of "challenges from abroad" like the eurozone crisis and high oil prices.

Labour's finance spokesman Ed Balls attacked Osborne for not having delivered on his aim to eradicate the budget deficit by 2015.

"You promised to balance the books but that promise is in tatters," Balls told the Chancellor.

The government will gain £5.0 billion -- almost half of the total cuts -- via a new efficiency drive across the civil service, he revealed.

"We have been... driving down costs, renegotiating contracts and reducing the size of government," Osborne told parliament.

Public sector pay increases will be capped at an average of up to one percent for 2015/16.

And automatic progression pay -- whereby millions of public sector workers receive automatic annual pay increases for time served in addition to inflation-linked rises -- will be scrapped.

The Chancellor described the system as "deeply unfair" to those in the private sector who pay for them. But he added that government expenditure on health, schools and foreign aid would be protected.

A range of other government departments would face average cutbacks of between eight and ten percent during the future financial year, which runs from April to March.

And Osborne said that welfare benefit claimants who did not speak English would be compelled to attend language courses -- or have their benefits cut.

The spending review set out how Britain will spend a total of £740 billion of taxpayers' cash in 2015/2016.

"We need to find another £11.5 billion of further savings," Osborne added.

"Finding savings on this scale has not been easy -- these are difficult decisions."

He said the coalition would stick to a path of austerity despite the country's fragile economic recovery.

"We will not let up. I will not let that happen. The reform will continue," Osborne told lawmakers, vowing to continue to slash the record deficit inherited from Labour in 2010.

Osborne added that he would also use the new savings to invest £50 billion in education, science, roads and railways -- which do not form part of the government's day-to-day spending.

Analysts were quick to point out that both the infrastructure boost and spending cutbacks had already been flagged in the Chancellor's annual budget statement in March.

"Today's spending review was more of a political event than a macroeconomic one," noted Barclays analyst Simon Hayes.

Britain's economy returned to growth in the first quarter of this year, with gross domestic product (GDP) expansion of 0.3 percent according to the latest official data.

In doing so, the country avoided its third recession since the 2008 global financial crisis.

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http://www.globalpost.com/dispatch/news/afp/130626/britain-slashes-public-spending-election-year-0