Britain plans emergency budget amid deficit fears
Britain will hold an emergency budget on June 22, new finance minister George Osborne said Monday, warning of an urgent need to tackle the deficit or face the prospect of a Greek-style debt crisis.
The budget will be based on forecasts from a new independent body, he said, which will make an audit of everything from outstanding contracts to pension liabilities to assess the scale of the challenge facing the new government.
The Conservative-Liberal Democrat coalition led by Prime Minister David Cameron has made tackling the deficit a priority and promised cuts worth six billion pounds (8.7 billion dollars, seven billion euros) this year.
Speaking to reporters in London, Osborne said the 163.4-billion-pound deficit was the largest ever seen in peacetime and blamed the previous Labour government for "13 years of fiscal irresponsibility."
He promised accelerated action to cut the debt, warning: "Greece is a reminder of what happens when governments lack the willingness to act decisively and quickly, and when problems are swept under the carpet."
In their coalition agreement, signed after May 6 elections produced a hung parliament, the two parties in the new government promised to unveil their first budget within 50 days.
Osborne said he believed they needed "to act even sooner to restore confidence in our economy", which has been battered by a deep recession.
"The budget date will be Tuesday, 22 June, exactly six weeks or 42 days from the signing of the coalition agreement," he said.
It will be based on figures from the new Office for Budget Responsibility, which will make a "truly independent assessment" of the scale of the deficit and take responsibility for growth forecasts in the future.
"For the first time we will have a truly independent assessment of the state of the nation's finances," he said.
The chancellor of the exchequer admitted he was creating a "rod for my back" but said: "That is the whole point. We need to fix the budget to fit the figures, not fix the figures to fit the budget."
In the emergency budget, Osborne will set out tax and spending plans, measures to boost enterprise and reforms of the tax system to make it "fairer."
He will give the first outline of plans to cut six billion pounds this year from non-frontline public services next Monday, with the "great majority" of the savings used to start paying down the deficit.
"The Treasury's assessment is that there is a strong economic case for an immediate spending reduction of six billion pounds. So we are in no doubt that this action is advisable," Osborne said.
"By tackling wasteful spending now rather than later, we can demonstrate our commitment to tackling the deficit."
Osborne was flanked by Lib Dem Treasury minister David Laws, whose party had argued that immediate cuts would harm the economy, which only exited recession in the final quarter of 2009. They backed down in the coalition talks.
Laws said the scale of the problem was laid bare in a note from his predecessor which said simply: "Dear Chief Secretary, I'm afraid to tell you there's no money left'."
The author of the note, former chief secretary to the Treasury Liam Byrne, insisted it was a joke.
© 2010 AFP