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Budget cuts

October 20, 2010

Britain's deficit is alarmingly high - at over 10 percent of GDP. In an attempt to get the UK back on track, the chancellor of the exchequer has announced new austerity measures, including half a million job cuts.

Britain's Chancellor of the Exchequer George Osborne in the House of Commons
Osborne's speech was cheered from the government benchesImage: AP

British Chancellor of the Exchequer George Osborne used a speech to the House of Commons on Wednesday to announce his country's biggest public spending cuts since World War II.

The chancellor outlined budget cuts to the tune of seven billion pounds (eight billion euros, $11 billion) as well as projected spending reductions of 81 billion pounds over four years.

"Today is the day when Britain steps back from the brink, when we confront the bills from a decade of debt," Osborne said, to cheers from the government benches in the House.

"[It's] a day of rebuilding, when we set out a four-year plan to put our public services and welfare state on a sustainable footing for the long term," he added.

Slashing the budget

Red traffic lights in Parliament Square in front of the 'Big Ben' clock tower
The government plans major spending cutsImage: AP

The Conservative chancellor outlined wide-reaching austerity measures, including a drop in police budgets, a 24-percent cut in spending by the Foreign Office and an increase in the state pension age from 65 to 66 in 2020 - six years earlier than previously planned. The government also intends to slash welfare spending by making changes to incapacity and housing benefits.

The opposition Labour Party meanwhile accused Osborne of playing with people's futures, with half a million public sector jobs expected to be lost.

While Britain has remained true to its overseas aid pledges and increased spending on schools and the National Health Service, it will now make cuts to departmental budgets at an average of just under 20 percent.

Job cuts 'reckless'

Reining in spending means cutting some 490,000 public sector jobs, according to the Office for Budgetary Responsibility. The chancellor said he regretted that many would lose their jobs, but that it "is unavoidable when the country runs out of money."

Shadow Chancellor Alan Johnson came out against the proposed job cuts, saying they were "reckless" and that the British people would suffer.

"Today is the day that abstract figures and spread-sheets turn into people's futures, people's jobs, people's services, their prospects for the future," Johnson said.

Deficit triples disaster rates

But the coalition government has laid blame for the cuts at the door of the previous Labour administration for running up significant debts. They insist that action must be taken now, and rapidly, if investor confidence in the British economy is to be restored.

Britain's Queen Elizabeth II waves from her carriage
Even the Queen's allowance will be affected by budget cutsImage: AP

The sheer size of Britain's debts makes cuts necessary, according to Dr. Andrew Lilico, chief economist at right-of-center think tank Policy Exchange.

"Running a deficit of around 10 percent of GDP is just way off the mark," Lilico said, adding that "within Europe there are restrictions under treaty rules that say they should have deficits of no more than three percent of GDP."

"We're running a deficit well over three times as much as what was previously thought to be the absolute maximum that you should be running even in a disaster scenario," Lilico added.

Unions plan to put up a fight

Trade unions, meanwhile, are promising to fight public sector job losses and have threatened widespread industrial action. Already on Wednesday, protesters descended on Westminster to express their disapproval of the austerity measures.

Eighty-one billion pounds worth of cuts over four years represent an approximate halving of Britain's budget deficit. The coalition government claims this will restore the economy to health, although opponents argue the measures may have the opposite effect, plunging Britain back into recession.

Author: Olly Barratt, London (dl, AFP, AP, dpa)

Editor: Chuck Penfold