The British government has unveiled
the country’s biggest spending cuts since the end of the Second World War.
The government announced it would
cut half a million public sector jobs, raise the retirement age and slash the welfare
After months of bitter
negotiations, Conservative finance minister George Osborne confirmed he would
press ahead with almost all the spending cuts he had outlined in the June
He says the cuts will amount to
$130 billion over the next four years, which equates to a total spending cut of
19 per cent over the period.
Speaking in the House of Commons,
Mr Osborne said 490,000 public sector jobs would be cut by 2015.
“Now let’s be clear that’s
over four years, not overnight, and much of that will be achieved through
natural turnover by leaving posts unfilled as they become vacant,” he
“But yes, there will be some
redundancies. That is unavoidable when the country has run out of money.”
Capital spending, however, he said
would be 2 billion pounds higher per year than originally planned because of
the difficulty of getting out of contractual obligations.
“Tackling this budget deficit
is unavoidable. The decisions about how we do it are not. There are choices.
Investment in the future rather than the bills of past failure. That is our
choice,” Mr Osborne said.
Economists are split between those
who say the drastic action is needed and those who argue it will tip Britain
back into recession.
Almost all agree, however, that
growth will slow and the Bank of England will have to keep monetary policy
super-loose for the foreseeable future.
Mr Osborne said the state pension
age for men and women will rise to 66 by 2020.
He said he would also cut a further
$11 billion off the welfare budget on top of the $17 billion of reductions he
identified in June.
The British government is braced
for an uproar but Mr Osborne said he had no choice given the need to cut a
record budget deficit of 11 per cent of gross domestic product (GDP) – the
highest in the G7 – to around 2 per cent in 5 years, a fiscal tightening of
some $178 billion, a quarter of which will come from tax rises.
No previous British government has
tried anything as ambitious and the National Institute of Economic and Social
Research think tank said it thought the government could only push through half
the planned cuts.