UK cuts spending to slash debt

  • 09/07/2015
British finance minister George Osborne (Reuters)
British finance minister George Osborne (Reuters)

By Roland Jackson

British finance minister George Osborne has unveiled fresh austerity measures to slash the country's debt, evoking the plight of crisis-hit Greece in presenting the first purely Conservative budget for nearly 20 years.

Chancellor of the Exchequer Osborne on Wednesday (local time) slashed welfare spending to honour campaign promises after his Conservative Party - headed by Prime Minister David Cameron - unexpectedly won an outright majority in a May 7 general election.

"This is a Conservative budget that can only be delivered because the British people trusts us to finish the job," said Osborne.

"The greatest mistake this country could make is to think all our problems are solved," he told MPs during a speech lasting over an hour.

"You only have to look at the crisis in Greece to realise if a country is not in control of the borrowing, the borrowing takes control of the country."

Osborne declared the government would save £37 billion (NZ$84.38 billion) in further fiscal consolidation over the next five years.

"Today I set out how we will find just under half of that - £17 billion." he told MPs.

"We found savings of £12 billion from welfare and £5 billion from tackling tax evasion, avoidance, planning and imbalances in the tax system.

"The other half will largely come from government departments through savings and cuts."

The public deficit is to be cut at the same pace as in the previous 2010-2015 parliament.

The public purse is expected to shift to a surplus by 2019/2020, which is a year later than predicted at the time of the last budget presented in March.

There was mixed news on the chancellor's latest forecasts for economic growth.

Gross domestic product is set to grow by 2.4 percent this year, down from a prior estimate of 2.5 percent, after a stronger-than-expected 3.0-percent expansion in 2014.

The economy is set to expand by 2.3 percent in 2016.

Borrowing was revised down to £69.5 billion in the current financial year, but was then revised up to £43.1 billion and £24.3 billion the following two years, compared to a March forecast of £39.4 billion and £12.9 billion respectively.

Corporation tax, levied on business profits, will be reduced from 20 percent to 19 percent in 2017 and 18 percent by 2020.