Tough cuts expected to save UK

The
biggest threat to Britain’s economy is its huge budget deficit, and Tuesday’s
emergency budget on will save the country from the fate of debt-stricken
Greece, British finance minister George Osborne said.

Measures
in the budget include a bank levy and reform of welfare benefits and public
sector pay. Other plans include payroll tax breaks for new businesses, a
council tax freeze and a review of public sector pensions.

“You
can see in Greece an example of a country that didn’t face up to its problems,
and that is the fate that I want to avoid,” Osborne said.

“I’m
absolutely clear, I don’t want the question even asked, ‘Can Britain pay its
way in the world?’ I’m going to prove that we can,” he said, adding that
the budget’s austerity measures would be staggered over five years.

Britain’s
budget deficit is at about 11 per cent of national output, and reducing the
deficit is the centrepiece policy of the new coalition government, made up of
the centre-right Conservative Party and centre-left
Liberal Democrats.

The
budget is the tightest in at least 30 years, and with public sector job losses
and deep pay and benefit cuts expected, the plan is likely to stoke public discontent
and strain the fledgling ruling alliance.

Osborne
indicated capital gains tax — a tax on the sale of assets such as real estate
and shares — would rise, despite vigorous opposition from senior Conservative
politicians.

The
levy is currently at 18 per cent, and some workers switch their income revenue,
which is taxed at between 20 and 50 per cent, to capital gains to pay less tax.

“Here
is a tax where at the moment we see massive income tax evasion, we see people
shifting their income … and that’s not fair given the current situation, so
we’ll deal with that,” Osborne said, without saying by how much the levy
will rise.

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