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Britain slashes spending in new austerity drive – Osborne promises to save $57bn in fiscal consolidation

Protesters hold up placards as they gather in Parliament Square in central London yesterday as British Finance Minister George Osborne unveiled fresh austerity measures. (Inset) Osborne holds up the Budget Box outside 11 Downing Street in central London.—AFP

Protesters hold up placards as they gather in Parliament Square in central London yesterday as British Finance Minister George Osborne unveiled fresh austerity measures. (Inset) Osborne holds up the Budget Box outside 11 Downing Street in central London.—AFP

LONDON: British Finance Minister George Osborne unveiled fresh austerity measures yesterday to slash the country’s debt, evoking the plight of crisis-hit Greece in presenting the first purely Conservative budget for nearly 20 years.

Chancellor of the Exchequer Osborne slashed welfare spending to honor campaign promises after his Conservative partyheaded by Prime Minister David Cameron-unexpectedly won an outright majority in a May 7 general election. “This is a Conservative budget that can only be delivered because the British people trusts us to finish the job,” said Osborne, who now has a free hand with the public finances after a tense five-year coalition with the centrist Liberal Democrats. “The greatest mistake this country could make is to think all our problems are solved,” he told lawmakers during a speech lasting over an hour. “You only have to look at the crisis in Greece to realize if a country is not in control of the borrowing, the borrowing takes control of the country.”

The budget would transport Britain “from a low wage, high tax, high welfare economy, to the higher wage, lower tax, lower welfare country we intend to create”, he said. Osborne declared the government would save £37 billion ($57 billion, 51 billion euros) in further fiscal consolidation over the next five years. “Today I set out how we will find just under half of that — £17 billion.” he told lawmakers. “We found savings of £12 billion from welfare and £5 billion from tackling tax evasion, avoidance, planning and imbalances in the tax system. “The other half will largely come from government departments through savings and cuts.”

Deficit reduction
The public deficit is to be cut at the same pace as in the previous 2010-2015 parliament. The public purse is expected to shift to a surplus by 2019/2020, which is a year later than predicted at the time of the last budget presented in March. “Without sound public finances there is no economic certainty for working people,” Osborne said. “We should always fix the roof while the sun is shining.” But he admitted: “”Britain still spends too much, borrows too much and our weak productivity shows we don’t train enough or build enough or invest enough.” There was mixed news on the chancellor’s latest forecasts for economic growth. Gross domestic product is set to grow by 2.4 percent this year, down from a prior estimate of 2.5 percent, after a strongerthan- expected 3.0-percent expansion in 2014.

The economy is set to expand by 2.3 percent in 2016. Borrowing was revised down to £69.5 billion in the current financial year, but was then revised up to £43.1 billion and £24.3 billion the following two years, compared to a March forecast of £39.4 billion and £12.9 billion respectively. Osborne also confirmed there would be no change to income tax thresholds or value added taxation (VAT) for at least five years. He will cap annual welfare payments at £23,000 per household in London, against the current level of £26,000. The amount will be set at £20,000 outside the capital. Corporation tax, levied on business profits, will be reduced from 20 percent to 19 percent in 2017 and 18 percent by 2020.

Sticking to austerity
The centre-right Tories swept into power on the back of promises to stick to the austerity plan that they implemented with the Liberal Democrats during the last coalition government. Yesterday’s spending plan sought to build upon Osborne’s first budget of the year, which was presented under the previous coalition in March. It was Britain’s first budget written solely by the Conservatives since 1996.

During the coalition years, Osborne was forced to soften some of his austerity measures in the face of fierce pressure from the Liberal Democrats. However, his priority remains tackling Britain’s total debt, which stands at about £1.5 trillion. The coalition had already overseen billions of pounds in cuts to state spending to slash a record deficit inherited from the previous Labor government. — AFP

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This article was published on 08/07/2015