Britain’s government unveiled the harshest spending cuts for decades yesterday, slashing budgets by around a fifth and taking the axe to the country’s comprehensive welfare system.
Finance minister George Osborne said nearly half a million public sector jobs would go as a result of the austerity measures, and the age at which state pensions are paid to men and women would rise to 66 by 2020.
Mr Osborne insisted that the £83 billion (€95 billion) package – watched around Europe by governments with similar deficit worries – marked “the day that Britain steps back from the brink.”
“This coalition government faced the worst economic inheritance in modern history,” he added. “A stronger Britain starts here.”
Prime Minister David Cameron’s Conservative-Liberal Democrat coalition came to power in May saying it had to take drastic action to eliminate Britain’s record £154.7-billion deficit – a legacy of the previous Labour government.
The opposition, unions and some economists say the cuts are a gamble that could plunge the world’s sixth largest economy economy back into recession.
Mr Osborne confirmed the government would cut 490,000 public sector jobs over four years – from a total of around six million – adding that the job losses were “unavoidable when the country has run out of money”.
Government departments are facing average cuts of 19 per cent over four years except health and overseas aid, which are ring-fenced. They are lower than the expected 25 per cent.
The Foreign Office will have 24 per cent slashed from its budget, police spending will fall by four percent each year and the Home Office and Ministry of Justice will each fall by six per cent a year.
Some of the biggest cuts are being made in welfare, which accounts for around a third of government spending. Mr Osborne unveiled savings of seven billion pounds a year.
He confirmed child benefit will be cut for many higher earners, while raising the state pension age is expected to save over five billion pounds a year. Public sector workers will also have to pay more into their state pensions.
The minister, officially known as the Chancellor of the Exchequer, said the cuts were the “greatest reform to the welfare state for a generation”.
Ed Miliband, the leader of the opposition Labour party, said the cuts could harm the economy.
The government is “taking the biggest gamble in a generation with growth, with people’s jobs and people’s livelihoods,” he said shortly before Mr Osborne’s announcement.
Unions lined up to lambast the cuts, which have sparked a series of protests in Britain including demonstrations by thousands of people in London on Tuesday.
“This is not a spending review – it’s a massacre,” said Derek Simpson, the joint leader of Unite, Britain and Ireland’s biggest union.
Dave Prentis, general secretary of UNISON, the largest public sector workers’ union, said the “ideologically driven” cuts were “poisoning the country’s chances of recovery.”
But business leaders welcomed the spending review – which the International Monetary Fund also endorsed last month in a boost to the coalition government.
“The chancellor has got the strategic direction of this spending review right,” said Richard Lambert, director general of the Confederation of British Industry.
The coalition started the cuts process on Tuesday, announcing that it would shrink the country’s armed forces, scrap key assets including an aircraft carrier and reduce the defence budget by eight per cent.
Among other cuts announced yesterday by Mr Osborne, the BBC will take responsibility for funding the World Service, which was previously covered by the Foreign Office. The spending review was unveiled as official data showed British public sector overspending widened in September to 16.2 billion pounds, a record monthly high.
The pound was down against the euro after Mr Osborne’s announcement at 88.10 pence to one euro, but was rising against the dollar at 1.580 dollars to one pound.