UK gov’t to cut welfare budget as election nears

LONDON - Agence France-Presse

Britain’s Chancellor of the Exchequer George Osborne (L) holds his Autumn Statement document as he leaves the Treasury in Londonin this Dec 5 file photo. ‘We need to find a further 25 billion of cuts after the election,’ he warned. AFP photo

British finance minister George Osborne announced major cuts to the country’s welfare spending on on Jan.6 as he warned voters that the economic recovery could not be taken for granted.

With an election due in 16 months and the government facing calls to put more money in people’s pockets after years of austerity, Osborne stuck to his message that the only way to return the economy to health is to fix its finances.

“As we start the New Year, I want to warn you about a dangerous new complacency around at the moment,” he said in a speech at a car-parts plant in Birmingham, central England.
“You hear some talking as if the hard part of the job is done, and we can go back to the bad old habits.”

The Conservatives continue to lag behind the opposition Labour party in opinion polls. But they score more highly for economic policy and they regularly blame Labor for running up a budget deficit equivalent to 11 percent of gross domestic product before it lost power in the 2010 election.

A surprisingly strong recovery in the economy last year turned Britain from a laggard to a leader in growth terms among the world’s big rich nations, though overall output is still below pre-crisis levels.

A survey yesterday showed growth in Britain’s dominant services sector slowed unexpectedly in December, but confidence rose and the economy still looks likely to have recorded its strongest expansion since 2007 last year.

Hard year may be ahead

In his speech, Osborne warned that the eurozone’s troubles and a continuing repair of Britain’s banking system still posed risks to the recovery and he underscored the need for more belt-tightening.
Britain’s welfare system could not be protected from further big cuts which would amount to 12 billion pounds ($19.7 billion) in each of the first two years of the next parliament, after the election in May 2015, Osborne said.

“We need to find a further 25 billion of cuts after the election. We have to make decisions about where those cuts are to be found,” he also told BBC radio.

 “The truth is there are no easy options here, and if we are to fix our country’s problems, and not leave our debts to our children to pay off, then cutting the welfare bill further is the kind of decision we need to make,” he said.

As well as facing criticism from Labor for the decline in living standards since the financial crisis, Osborne is under pressure from some members of his Conservative party to cut income taxes more aggressively.
 
He highlighted how the government has raised the tax-free allowance for many earners but suggested he would not be rushing to make further tax cuts.

“If government wants to find a direct way to put money into people’s pockets, you do that by permanently cutting people’s taxes by permanently cutting the spending those taxes pay for.”