UK outlines cuts to public spending
By Robert Barr |
May 25, 2010, Tuesday
|
Print Edition
Print Edition
BRITAIN'S new Treasury chief yesterday outlined more than 6 billion pounds (US$8.7 billion) in spending cuts, with most of the savings dedicated to cutting the nation's record budget deficit.
George Osborne, the chancellor of the exchequer, said the cuts include 2 billion pounds from IT programs, suppliers and property, 700 million pounds from holding back on recruitment and 500 million pounds from cutting "low value" spending.
Osborne gave no figures on how many public sector jobs would be cut, but he said most cuts would be made by not filling vacancies. The reductions total 6.24 billion pounds, amounting to less than 1 percent of annual public expenditure.
"This is the first time this government has announced difficult decisions on spending," Osborne told a news conference. "It will not be the last."
But he did not comment on tax increases, which are widely expected to come as part of the deficit-cutting drive.
"Over the summer there does need to be a conversation in the country about what we can afford going forward. There are going to have to be difficult trade-offs," he said.
Debt mountain
Governments all over Europe have run up large deficits and heavier debt loads due to the global economic turmoil of the past three years, as tax receipts have fallen and stimulus and bailout costs have hit budgets. They are now facing hard decisions about how to get debt under control without undermining a shaky economic recovery.
Osborne's Conservative Party leads a governing coalition with the Liberal Democrats which took power two weeks ago, and the government has moved quickly to cut spending and to set up an independent Office of Budget Responsibility to assess public finances and forecasts, which previously had been the chancellor's responsibility.
"The new government deserves credit for identifying these cuts on a department-by-department basis in the space of less than two weeks, but we must remember that 6 billion pounds is still a drop in the ocean compared with the scale of tightening that will be required," said Hetal Mehta, senior economics adviser to the Ernst & Young ITEM Club.
Brendan Barber, general secretary of the Trades Union Congress, said the economies of Britain and its European trade partners are still fragile. "This is not the right time to be cutting back," he said. "If the UK starts drifting back into recession as a result of cuts, the deficit will only widen and the money markets will become even more panicked," said Barber.
George Osborne, the chancellor of the exchequer, said the cuts include 2 billion pounds from IT programs, suppliers and property, 700 million pounds from holding back on recruitment and 500 million pounds from cutting "low value" spending.
Osborne gave no figures on how many public sector jobs would be cut, but he said most cuts would be made by not filling vacancies. The reductions total 6.24 billion pounds, amounting to less than 1 percent of annual public expenditure.
"This is the first time this government has announced difficult decisions on spending," Osborne told a news conference. "It will not be the last."
But he did not comment on tax increases, which are widely expected to come as part of the deficit-cutting drive.
"Over the summer there does need to be a conversation in the country about what we can afford going forward. There are going to have to be difficult trade-offs," he said.
Debt mountain
Governments all over Europe have run up large deficits and heavier debt loads due to the global economic turmoil of the past three years, as tax receipts have fallen and stimulus and bailout costs have hit budgets. They are now facing hard decisions about how to get debt under control without undermining a shaky economic recovery.
Osborne's Conservative Party leads a governing coalition with the Liberal Democrats which took power two weeks ago, and the government has moved quickly to cut spending and to set up an independent Office of Budget Responsibility to assess public finances and forecasts, which previously had been the chancellor's responsibility.
"The new government deserves credit for identifying these cuts on a department-by-department basis in the space of less than two weeks, but we must remember that 6 billion pounds is still a drop in the ocean compared with the scale of tightening that will be required," said Hetal Mehta, senior economics adviser to the Ernst & Young ITEM Club.
Brendan Barber, general secretary of the Trades Union Congress, said the economies of Britain and its European trade partners are still fragile. "This is not the right time to be cutting back," he said. "If the UK starts drifting back into recession as a result of cuts, the deficit will only widen and the money markets will become even more panicked," said Barber.
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