Britain slashes spending as it tries to balance the books

19th October 2010, Comments 0 comments

Britain will unveil billions of pounds in public spending cuts Wednesday in a sweeping review of government expenditure, risking protests and a million jobs as it seeks to pay off a huge deficit.

Prime Minister David Cameron's Conservative-Liberal Democrat coalition wants to cut spending by 83 billion pounds (130 billion dollars, 95 billion euros) by 2014-15, and the review will reveal exactly where the axe will fall.

In its biggest challenge since taking power in May, the coalition wants to eliminate Britain's 154.7-billion-pound deficit -- a legacy of the previous Labour government and the recession -- over the next five years.

Finance minister George Osborne says his plans, which will see departmental spending reduced by an average of 25 percent, are needed to avoid a Greek-style crisis in a country "on the brink of bankruptcy".

But the harshness of the measures has worried some economists who fear they could plunge Britain's economy back into recession, a concern shared by the now opposition Labour party.

The International Monetary Fund has enthusiastically endorsed Osborne's plans, and European governments are watching closely.

Government research suggests the cuts will result in more than 600,000 job losses in the public sector in the next six years, while the PwC professional services firm estimates that one million private and public jobs will go.

Trade unions have reacted with anger, warning that public services will be damaged and the poorest people will be left struggling. The respected Institute for Fiscal Studies also warned of the impact on the lowest earners.

Labour's finance spokesman, Alan Johnson, has also warned that the cuts were being made "too deeply and too quickly".

Union leaders are planning a day of protest on Tuesday and have threatened widespread strike action over the coming months.

Under the coalition's plans, three-quarters of the money needed to pay off the deficit will be raised by cutting spending, and the rest by raising taxes, including sales tax. Labour wants a more equitable balance.

The scale of the cuts has provoked disquiet among some Liberal Democrats, the junior coalition partners, who fear they could cause lasting social damage.

One senior Lib Dem, energy minister Chris Huhne, suggested the cuts "were not lashed to the mast" and the government could scale them back if the economy starts to deteriorate.

But Osborne's allies rejected any suggestion of backing down.

Cameron is also under pressure from his own Conservatives over cuts to the military budget, particularly given Britain's continuing commitment to the war in Afghanistan.

Media reports suggest that Cameron personally intervened with the Treasury on the defence ministry's behalf to reduce its cuts to seven or eight percent.

Health and international aid are exempt from the cuts, and it now appears that the brunt of the pain will be felt in a handful of areas including justice -- with the closure of courts and possibly prisons -- and welfare.

The first savings in welfare, which accounts for about one third of all government spending, were revealed earlier this month with a plan to end child benefit payments for better-off families.

Polls suggest broad public support for slashing spending, and 45 percent of respondents in a weekend survey said they trust the coalition to fix the economy, compared to just 23 percent who trusted Labour.

But Peter Kellner, president of polling company YouGov, warned people's support will depend largely on how the cuts impact on public services, something that may not be felt for several years.

"It depends on whether the government has succeeded in protecting frontline services, or whether people are starting to feel that their lives are being materially affected by the cuts," he told AFP.

© 2010 AFP

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