Tags: uk | budget | cuts

UK Departments Told to Plan for Deep Budget Cuts of as Much as 40 Percent

Tuesday, 06 Jul 2010 06:37 PM

The U.K. coalition government defended plans to consider far deeper public spending cuts than expected after opponents warned that it could trigger a second recession and a wave of strikes.

The Labour Party, which lost power in May after 13 years, said the government's decision to look at cuts of up to 40 percent, instead of the 25 percent announced last month, could lead to one million job losses.

However, Transport Secretary Philip Hammond said departments were unlikely to see full 40 percent cuts, a level rarely seen in developed countries, despite being asked to consider them.

"What we are not going to do is just slice 25 percent off every department. We will look at the menu of options for each department," he told the BBC. "I don't expect any departments will see a 40 percent cut, but some departments may see cuts a bit higher than 25 percent."

Conservative Prime Minister David Cameron's top priority is to cut the record peacetime deficit, but he must balance that against keeping his promise to protect some public services and the need to hold together Britain's first coalition in 65 years.

Financial markets broadly welcomed the government's budget last month which laid out the harshest cuts in decades to reduce the deficit and avoid a Greek-style debt crisis.

Austerity measures in Greece have led to national strikes, mass rallies and clashes with police. Heavily indebted Spain has also seen widespread strikes and protests.

Analysts are closely watching the Conservatives' alliance with the smaller Liberal Democrats for any signs that unpopular cuts could weaken their coalition or lead to unrest.

Former Labour minister Ed Balls, campaigning to become party leader after the departure of defeated prime minister Gordon Brown, said the cuts would "send a chill down the spines of millions."

"The government's own forecasts show these measures will put our recovery at risk with lower growth and over a million jobs lost," he said. "These plans risk a double-dip recession."

Mark Serwotka, head of the Public and Commercial Services Union, whose 300,000 members include many civil servants, said such cuts could lead to the worst industrial unrest for years.

"They will face resistance the like of which we haven't seen in this country for decades," he told the BBC. "We will see not just co-ordinated industrial action by unions but campaigns in every community."

A Treasury spokeswoman said many departments had been asked to identify how they could cut 40 percent of their budget and what effect it would have. But she stressed that this was only one option that would form the basis of budget talks.

"These planning assumptions are not final settlements and do not commit the Treasury or departments to final settlements," the spokeswoman said. "These assumptions will be negotiated."

The education, health and defense ministries would be spared such unprecedented levels of cuts. Those affected include the interior ministry, transport and work and pensions departments.

Former Liberal Democrat leader Paddy Ashdown dismissed suggestions of a second recession and said the bigger risk was of losing the markets' confidence by failing to make cuts. "There are tough decisions being taken and they are the right decisions," he told Sky News.

© 2017 Thomson/Reuters. All rights reserved.

 
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The U.K. coalition government defended plans to consider far deeper public spending cuts than expected after opponents warned that it could trigger a second recession and a wave of strikes. The Labour Party, which lost power in May after 13 years, said the government's...
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2010-37-06
Tuesday, 06 Jul 2010 06:37 PM
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