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Britain announces spending cuts

Osborne seeks to balance budget in 4 years with austerity plan

- Associated Press - Wednesday, October 20, 2010

LONDON | Britain outlined the sharpest cuts to public spending since World War II on Wednesday — slashing benefits and cutting public sector jobs with an austerity plan aimed at clearing record debts that swelled during the global financial crisis.

After the country spent billions bailing out indebted banks, and suffered a squeeze on tax revenue and an increase in welfare bills, Treasury chief George Osborne has staked the coalition government's future on tough economic remedies.

Mr. Osborne confirmed there would be $128 billion in spending cuts through 2015, which he claims are necessary along with some tax increases to wipe out a spending deficit of $172 billion.

As many as half a million public sector jobs will be lost, about $28.5 billion axed from welfare payments and the pension age raised to 66 by 2020, earlier than previously planned.

Even Queen Elizabeth II will take a hit, asked to trim the budget the government provides for her staff by 14 percent.

"It is a hard road, but it leads to a better future," Mr. Osborne said, preparing the public for hardship as he seeks a balanced budget within four years.

Mr. Osborne stood on the floor of the House of Commons for more than an hour and dismantled program after program built during the Labor government's 13-year reign, saying Britain must pay "the bills from a decade of debt."

The Conservatives promised to scythe through Britain's debts after they made an unlikely pact to form a government with the smaller Liberal Democrats following an inconclusive May election.

Labor lawmaker Alan Johnson, his party's economic spokesman, claimed many Conservatives relished the chance to shrink the size of the British state. "We've seen people cheering the deepest cuts to public spending in living memory," he said.

Mr. Osborne insisted Britain's richest would bear the greatest burden of tax increases and welfare cuts, citing changes that will see about 1.5 million better-off families lose child benefit payments. However, housing payments and about a dozen other benefits for poorer Britons also will be restricted.

As ordinary Britons lose out, Mr. Osborne confirmed that a temporary levy on bank balance sheets will be made permanent to "extract the maximum sustainable taxes from the banking system."

Spending on health, education and overseas aid will be maintained at current levels or increased, while many major transport and climate change projects will go ahead.

But almost all other areas of government face average cuts of 19 percent to their budgets — which are severe, but not the 25 percent cuts initially feared.

Some critics say the government could have chosen to clear Britain's debts at a slower pace, protecting public sector jobs. They accuse Mr. Osborne of an ideological commitment to small government — and using the crisis to accomplish that.

"This spending review will throw a generation of people on the scrap heap," said Mark Serwotka, general secretary of the Public and Commercial Services labor union. "These cuts are a political choice."

Mr. Osborne confirmed the policing budget will fall by 4 percent a year — part of an overall 23 percent cut to the Home Office's resource spending. The Association of Chief Police Officers said Britain would have fewer police as a result.

In one of the most significant proposals, Mr. Osborne said the state pension age for men and women will rise to 66 by 2020, four years early. It will alter retirement plans for 5 million people, but save $7.8 billion a year once it comes into effect.

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