UK to cut spending and reduce loans
Source: Agencies |
May 18, 2010, Tuesday
|
Print Edition
Print Edition
BRITAIN'S new coalition government will next Monday outline six billion pounds (US$8.75 billion) of spending cuts this year before its first budget on June 22, finance minister George Osborne said yesterday.
Osborne, launching a fiscal watchdog to ensure the new Conservative-Liberal Democrat government is held to account on tackling the record budget deficit, said most of the 2010 savings would be used to reduce borrowing and some would be allocated to support the job market.
"Deficit reduction and continuing to ensure the economic recovery is the most urgent issue facing Britain," Osborne said. "We understand that and we need to get moving."
The previous Labour government had warned that cutting spending this year could derail Britain's economic recovery but Osborne said he has the support of the Treasury and the Bank of England.
Britain's budget deficit is running at close to 12 percent of GDP, a similar level to that of crisis-hit Greece, and the new government has said bringing it down is a priority to avoid another economic crisis.
"Greece is a reminder of what will happen if governments lack the will to act decisively and quickly," Osborne said.
The new independent Office for Budget Responsibility will be headed by former Bank of England policy maker Alan Budd and will publish fiscal forecasts and recommendations, under plans made by the Conservative Party before this month's election.
Attempts by Labour, in power for 13 years until May, to build confidence in its budgets and forecasts failed to impress most economists but Osborne hopes his creation will help to reassure debt-wary markets that Britain is in safe hands.
"I am the first Chancellor to remove the temptation to fiddle the figures by giving up control of the economic and fiscal forecasts," Osborne said. "We need to fix the budget to fit the figures, not fix the figures to fit the budget."
Osborne, who became Britain's youngest chancellor of the exchequer or finance minister in 120 years last week, will deliver his emergency budget next month after the new office has published its first forecasts.
While six billion pounds of cuts will make only a small dent in the forecast 163 billion pound deficit, much steeper reduction is expected in years to come as the economy recovers, with government spending seen as ripe for action.
"The main burden of deficit reduction should be done by reduced spending," said Liberal Democrat Chief Secretary to the Treasury David Laws. "What we have not done is tied ourselves into an absolutely rigid formula."
The OBR will be expected to publish its forecasts at least twice a year around the time of the budget and pre-budget report, based on existing government policy at the time.
Osborne, launching a fiscal watchdog to ensure the new Conservative-Liberal Democrat government is held to account on tackling the record budget deficit, said most of the 2010 savings would be used to reduce borrowing and some would be allocated to support the job market.
"Deficit reduction and continuing to ensure the economic recovery is the most urgent issue facing Britain," Osborne said. "We understand that and we need to get moving."
The previous Labour government had warned that cutting spending this year could derail Britain's economic recovery but Osborne said he has the support of the Treasury and the Bank of England.
Britain's budget deficit is running at close to 12 percent of GDP, a similar level to that of crisis-hit Greece, and the new government has said bringing it down is a priority to avoid another economic crisis.
"Greece is a reminder of what will happen if governments lack the will to act decisively and quickly," Osborne said.
The new independent Office for Budget Responsibility will be headed by former Bank of England policy maker Alan Budd and will publish fiscal forecasts and recommendations, under plans made by the Conservative Party before this month's election.
Attempts by Labour, in power for 13 years until May, to build confidence in its budgets and forecasts failed to impress most economists but Osborne hopes his creation will help to reassure debt-wary markets that Britain is in safe hands.
"I am the first Chancellor to remove the temptation to fiddle the figures by giving up control of the economic and fiscal forecasts," Osborne said. "We need to fix the budget to fit the figures, not fix the figures to fit the budget."
Osborne, who became Britain's youngest chancellor of the exchequer or finance minister in 120 years last week, will deliver his emergency budget next month after the new office has published its first forecasts.
While six billion pounds of cuts will make only a small dent in the forecast 163 billion pound deficit, much steeper reduction is expected in years to come as the economy recovers, with government spending seen as ripe for action.
"The main burden of deficit reduction should be done by reduced spending," said Liberal Democrat Chief Secretary to the Treasury David Laws. "What we have not done is tied ourselves into an absolutely rigid formula."
The OBR will be expected to publish its forecasts at least twice a year around the time of the budget and pre-budget report, based on existing government policy at the time.
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