Tags: uk | budget | economy

Report: Budget Cuts Contracting UK Economy

Sunday, 17 Apr 2011 03:46 PM

While the U.S. embarks on a fiscal austerity plan, across the Atlantic, similar measures in the U.K. have failed to spark economic recovery.

The U.K. government unveiled the austerity plan about a year ago under the notion that cutting spending and attacking deficits would streamline the economy, making it efficient enough to grow and become competitive again.

So far, it seems, the only thing growing is more depressing headlines.

Retail sales fell 3.5 percent in March, the sharpest monthly downturn in 15 years,  while the Center for Economic and Business Research, an independent research group, is predicting real household income will contract by 2 percent this year, the New York Times reports.

In the U.S., politicians are divided as to how austere the country should go, with one side favoring more drastic spending cuts and the other arguing for a mix of cuts here and tax adjustments there.

Some feel that planned cuts to social programs that will mean the loss of 300,000 public-sector jobs will tip the U.K. back into a recession.

"My view is that we are in serious danger of a double-dip recession," says Richard Portes, an economist at the London Business School, according to the newspaper.

Lawmakers in the U.S. recently agreed on $38 billion in spending cuts in order to prevent a government shutdown. The Congressional Budget Office, however, says the deal will save Americans only $352 million through the end of the fiscal year -- a tiny fraction of the $1.4 trillion the U.S. has spent beyond its means, ABC News reports.

"In this deal, unfortunately, a lot of the savings are based on government accounting phraseology," says Mike Tanner, a budget analyst with the CATO Institute, according to the network.

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