Britain's finance chief vows no retreat on deficit plan

3rd October 2011, Comments 0 comments

British finance minister George Osborne strongly defended his deficit reduction plan on Monday, while insisting the government was taking action to boost sluggish economic growth.

The chancellor of the exchequer rejected calls to loosen his programme of spending cuts to eliminate the budget deficit by 2015, insisting that borrowing any more money would be a gamble with Britain's fiscal credibility.

In a speech to his Conservative Party conference, he ruled out any unfunded tax cuts or an increase in public spending, saying: "We are in a debt crisis. It's not like a normal recovery -- you can't borrow your way out of debt."

But in a bid to soften the blow of the governing coalition's austerity measures, Osborne also announced a freeze on local authority taxes for a second year, a measure costing 805 million pounds (930 million euros, $1.25 million).

"I don't pretend to you that these are not difficult days, and that there are not difficult days ahead, but together we will ride out the storm," Osborne told delegates gathered in Manchester, northwest England.

Osborne's deficit reduction programme is one of the most radical in the European Union, and as the economy continues to falter, he has faced increasing criticism from the opposition Labour Party that he is choking off growth.

In a major boost for his plan, however, the rating agency Standard and Poor's announced as he was speaking that it was confirming Britain's top AAA credit rating and maintaining a stable outlook.

This was despite predicting growth rates of around 1.8 percent on average in 2011-2014, lower than the 2.5 percent forecast by the Office for Budget Responsibility, the government fiscal watchdog.

In a bid to counter criticism that the government was focusing too much on deficit reduction and not enough on growth, Osborne announced a number of measures which aides said was proof of ministerial economic activism.

This included a plan for "credit easing" to help small businesses struggling for funds, where the government would sell government debt and use the money -- potentially billions of pounds -- to buy corporate bonds.

Osborne also announced plans to make it harder for people to go to employment tribunals -- another boost for small businesses -- and elsewhere, to boost mobile phone coverage, house building and scientific research.

© 2011 AFP

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