Britain unveils harsh spending cuts to tackle record deficit

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Britain's government unveiled the harshest spending cuts for decades on Wednesday, slashing budgets by around a fifth and taking the axe to the country's comprehensive welfare system.

Finance minister George Osborne said nearly half a million public sector jobs would go as a result of the cuts, and he raised the age at which state pensions are paid to men and women to 66 by 2020.

Osborne insisted that the 83-billion-pound (130-billion-dollar, 95-billion-euro) package marked "the day that Britain steps back from the brink."

"This coalition government faced the worst economic inheritance in modern history," he added. "A stronger Britain starts here."

Departments are facing average cuts of 19 percent over four years -- lower than the expected 25 percent -- except health and overseas aid, which are ring-fenced.

The Labour opposition, unions and some economists say the cuts are a gamble that could plunge the world's sixth largest economy economy back into recession, from which it emerged at the end of last year.

Prime Minister David Cameron's coalition came to power in May saying it had to take drastic action to to eliminate Britain's 154.7-billion-pound deficit -- a legacy of the previous Labour government and the recession.

Osborne confirmed the government would cut 490,000 public sector jobs over four years -- from a total of around six million -- adding that the job losses were "unavoidable when the country has run out of money".

Welfare takes up around a third of government spending and Osborne unveiled savings of seven billion pounds a year.

Other major changes which will save money in the welfare system include public sector workers having to pay more into their state pensions.

He confirmed child benefits will be cut for for many higher earners, a move that sparked outrage when he trailed it earlier this month.

The move to raise the state pension age is expected to save over five billion pounds a year.

The minister, officially known as the Chancellor of the Exchequer, said the cuts were the "greatest reform to the welfare state for a generation".

The Foreign Office will lose 24 percent from its budget, police spending will fall by four percent each year and the Home Office and Ministry of Justice will each fall by six percent a year.

Britain's Queen Elizabeth II will also feel the pinch, with royal household spending falling by 14 percent in 2012/2013 and the queen agreeing to a one-year suspension of goverment payments under the so-called "civil list."

Labour leader Ed Miliband said the cuts could harm the economy.

The government is "taking the biggest gamble in a generation with growth, with people's jobs and people's livelihoods," he said shortly before Osborne's announcement.

The International Monetary Fund has endorsed Osborne's spending cuts plans, and European governments facing major protests at their own austerity programmes are watching closely to see if Britain's work.

The coalition started the cuts process Tuesday, announcing that it would shrink the country's armed forces, scrap key assets like a flagship aircraft carrier and reduce the defence budget by eight percent.

Cameron said 17,000 service personnel would go from the British Army, Royal Air Force and Royal Navy by 2015 -- but vowed there would be "no cut whatsoever" to the level of support for forces in Afghanistan.

Among other cuts announced on Wednesday by Osborne, the BBC will take responsibility for funding the World Service, which was previously covered by the Foreign Office, he said.

The spending review was unveiled as official data showed British public sector overspending widened in September to 16.2 billion pounds, a record monthly high.

British trade unions have reacted with anger and thousands of union members and protesters rallied in London Tuesday, waving placards that said "Don't Break Britain" and "No more cuts".

© 2010 AFP

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