UK unveils austerity steps to cut debt as Greece woes offer lesson
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BRITISH finance minister George Osborne unveiled fresh austerity measures yesterday to slash the country’s debt, evoking the plight of crisis-hit Greece in presenting the first purely Conservative budget for nearly 20 years.
Chancellor of the Exchequer Osborne slashed welfare spending to honor campaign promises after his Conservative party — headed by Prime Minister David Cameron — unexpectedly won an outright majority in a May 7 general election.
“This is a Conservative budget that can only be delivered because the British people trust us to finish the job,” said Osborne, who now has a free hand with the public finances after a tense five-year coalition with the centrist Liberal Democrats.
“The greatest mistake this country could make is to think all our problems are solved,” he told lawmakers during a speech lasting over an hour.
“You only have to look at the crisis in Greece to realize if a country is not in control of the borrowing, the borrowing takes control of the country.”
The budget would transport Britain “from a low wage, high tax, high welfare economy, to the higher wage, lower tax, lower welfare country we intend to create,” he said.
Osborne declared the government would save 37 billion pounds (US$57 billion) in further fiscal consolidation over the next five years.
“Today I set out how we will find just under half of that — 17 billion pounds,” he said.
“We found savings of 12 billion pounds from welfare and 5 billion pounds from tackling tax evasion, avoidance, planning and imbalances in the tax system.
“The other half will largely come from government departments through savings and cuts.”
The public deficit is to be cut at the same pace as in the previous 2010-2015 parliament.
The public purse is expected to shift to a surplus by 2019/2020, which is a year later than predicted at the time of the last budget presented in March.
“Without sound public finances there is no economic certainty for working people,” Osborne said.
“We should always fix the roof while the sun is shining.”
But he admitted: “Britain still spends too much, borrows too much and our weak productivity shows we don’t train enough or build enough or invest enough.”
There was mixed news on the chancellor’s latest forecasts for economic growth.
Gross domestic product is set to grow by 2.4 percent this year, down from a prior estimate of 2.5 percent, after a stronger-than-expected 3 percent expansion in 2014.
The economy is set to expand by 2.3 percent in 2016.
Borrowing was revised down to 69.5 billion pounds in the current financial year, but was then revised up to 43.1 billion pounds and 24.3 billion pounds the following two years, compared with a March forecast of 39.4 billion pounds and 12.9 billion pounds respectively.
Osborne also confirmed there would be no change to income tax thresholds or value-added taxation for at least five years.
He will cap annual welfare payments at 23,000 pounds per household in London, against the current 26,000 pounds. The amount will be set at 20,000 pounds outside the capital.
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