Tags: Britain to Slash Public Spending in Austerity Gamble

Britain to Slash Public Spending in Austerity Gamble

Wednesday, 20 October 2010 07:15 AM

Recession-battered Britain learns the true cost of the global financial crisis Wednesday, as the country's government outlines the largest cuts to public spending since World War II — slashing benefits and public sector jobs with a five-year austerity plan aimed at clearing the nation's debts.

After spending billions bailing out indebted banks, and suffering a squeeze on tax revenue and a hike in welfare bills, Treasury chief George Osborne will stake the coalition government's future on fixing the country's economic ills by the next election in 2015.

In an address to Parliament, Osborne will announce about 80 billion pounds ($128 billion) in spending cuts through 2015, which he claims are necessary alongside tax rises to wipe out a spending deficit which reached 156 billion pounds last year, and reduce Britain's huge debt.

It means as many as 500,000 public sector jobs are likely to be lost, while pay for almost all government workers has already been frozen for two years under an initial round of austerity measures announced in June.

Even Queen Elizabeth II has taken a share of the strain, as Osborne froze government funding for her palaces and staff.

The Treasury chief warned government departments to prepare to cut their budgets by up to 25 percent over four years. While the eventual cuts are likely to be much less severe, they will still amount to the sharpest retrenchment in about 60 years.

About 1.2 million families will lose child benefit payments beginning in 2013, and tens of thousands more Britons are likely to see their welfare checks trimmed or scrapped. If the government decides to slash its winter fuel allowance, millions of retirees could lose out on subsidized heating. About 12 million people currently receive the payment.

"I wish there was another way. I wish there was an easier way. But I tell you: There is no other responsible way," Prime Minister David Cameron told an annual rally of his Conservative Party earlier this month.

The opposition Labour Party — in power for 13 years until May — advocates more tax hikes, alongside fewer and slower cuts.

"What I fear we are going to hear today is an irresponsible gamble with our economy and indeed many of the front line services that people rely on in our communities," Labour leader Ed Miliband said. "There is an alternative, there is a different way."

Osborne's sweeping plans to clear Britain's debts come despite the Conservative-led coalition government's fragile political position.

Britain's inconclusive national election in May, in which no single party won a majority, reflected the public's uncertainty over how to handle the country's debts, worth about 15,500 pounds ($25,000) for every citizen, according to some estimates.

Cameron's Conservative Party argues that failing to tackle the deficit quickly would leave the country struggling with astronomical interest payments. At current rates of spending, the Treasury estimates, Britain would end up spending more trying to meet its interest payments than it devotes to educating its children.

Members of the public were waiting anxiously this week for the details of Osborne's plan.

In the southern London district of Croydon, a group of seniors huddled around a kitchen table at a primary school, which hosts a government-funded community group offering entertainment and education to young people and the elderly.

The organization is already struggling with budget cuts. Eileen Dean, an 83-year-old retiree, worried what young and old alike will do if Osborne's budget trimming forces it to close.

"The kids aren't going to have anything to do, it'll be back to playing football in the streets and breaking windows," she said. "I might have to join them."

Recent surveys and protests suggest many Britons are uneasy about the cuts, even before the details have been announced. On Tuesday, hundreds of labor union members vowed to oppose Osborne's plans, marching to Parliament.

"We begin campaigning today, we're unfolding the banner," said Nick Long, a 52-year-old union representative from south London. "We will fight back."

Despite public fears, Osborne has some support for his plans. Last month the International Monetary Fund said Britain's economy was "on the mend," while a group of major businesses signed a joint-letter of support.

Norman Fowler, a Conservative minister under Margaret Thatcher and John Major, warned the cuts could herald years of "demonstrations, protests and industrial action."

There are few signs, however, that the British public will react to austerity measures with the scale of protests seen in France and Greece.

Osborne's cuts are expected to hit nearly every aspect of Britain's public life, and repercussions could be felt well beyond the island nation's borders.

Late Tuesday, the government announced that it was freezing the annual license fee paid by households to support the British Broadcasting Corp. for six years — pegging it to the current rate of 145.50 pounds (US$230).

At the same time the BBC will take on the costs for the World Service, which were previously largely paid for by the Foreign Office. In effect, the new arrangement is a 16 percent cut in the funding for BBC's domestic services.

Only two areas of spending are being protected.

The National Health Service — the sacred cow of British politics — is being insulated from the cuts, but must shed managerial posts under major reforms.

Cameron said the overall budget for international aid will be maintained, though ministers are overhauling priorities for assistance — offering less to emerging economies like China and India, and more to unstable states.

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Recession-battered Britain learns the true cost of the global financial crisis Wednesday, as the country's government outlines the largest cuts to public spending since World War II slashing benefits and public sector jobs with a five-year austerity plan aimed at clearing...
Britain to Slash Public Spending in Austerity Gamble
Wednesday, 20 October 2010 07:15 AM
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