UK swings austerity axe but spares key welfare scheme, police

26th November 2015, Comments 0 comments

Britain announced a fresh round of deep cuts to public spending Wednesday, but dropped a plan to reduce welfare payments for the poorest and spared the police from savings after the Paris attacks.

Unveiling a budget update, finance minister George Osborne said the government, which is borrowing £73.5 billion (105 billion euros, $110 billion) this year, is on track to balance its books by 2019-20.

This will be achieved through the most significant belt-tightening in a generation, which includes reducing welfare by £12 billion and the cutting budgets of some government departments by up to 37 percent.

However, Osborne, Prime Minister David Cameron's de facto deputy, avoided a succession of political landmines as he announced his plans to a packed House of Commons.

He dropped a plan to reduce tax credits -- a benefit payment for low-income working families -- after the House of Lords voted last month against the move in a humiliating defeat for the government.

Opponents of the cuts, including many within his own Conservative party as well as the main opposition Labour party under Jeremy Corbyn, said it would have left over three million families worse off.

"I've listened to the concerns. I hear and understand them," Osborne told lawmakers.

"Because I've been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether."

- Protecting the police -

Treasury sources indicated that the full £12 billion of planned welfare savings would still be carried out through reductions to other types of state benefits.

Experts said the spending plan helped position Osborne -- a likely prime ministerial contender when Cameron steps down by 2020 -- and the Conservatives in the political centre ground.

Finance minister since Cameron took office in 2010, Osborne said his spending plan was affordable because of projections that tax revenues were set to increase.

The 44-year-old also sprung a surprise by announcing that police funding would not be cut, defying a widespread expectation among senior officers and commentators.

"Now is not the time for further police cuts," Osborne told the Commons. "The police protect us and we're going to protect the police."

In England and Wales, the number of police has fallen nearly 12 percent since 2010 and senior police figures had warned that a further reduction could hit their ability to prevent a major Paris-style attack in Britain.

Britain's official economic growth forecast was held at 2.4 percent for 2015, but revised up to 2.4 percent for 2016 from 2.3 percent.

Debt was predicted to be 82.5 percent of national income this year, down from 83.6 percent at the time of Osborne's annual budget in July.

- Economists sceptical -

The finance minister also lowered his borrowing forecasts to £73.5 billion this year and to £49.9 billion next year.

But some analysts questioned how Osborne's figures added up, raising doubts over the forecasts on which his spending plan was based.

"Looking at the big picture, we continue to doubt that the public finances will heal as swiftly as the official forecasts expect," said Samuel Tombs of Pantheon Macroeconomics.

Royal Bank of Scotland economist Ross Walker said forecasts seemed "rose-tinted" and that the spending plan's politics seemed "more assured than the economics", while asset management firm Schroders predicted lower growth and a tax revenue shortfall.

Labour spokesman John McDonnell, a key ally of left-winger Corbyn, accused Osborne of taking too long to eliminate the deficit.

"The reality is this: after five years, the deficit has not been eliminated and this year it is expected to be over £70 billion," he said.

Osborne sweetened the cuts by announcing an affordable house building programme amid complaints that only the wealthiest can now afford to buy properties, particularly in southeast England.

The government will build 400,000 affordable homes in the "biggest house building by any government since 1970s", with extra support for London, Osborne added.

He also announced a higher rate of tax on people buying second homes and buy-to-let properties.


© 2015 AFP

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