Oct. 8 (Bloomberg) -- Chancellor of the Exchequer George Osborne pledged to “finish the job” as he rejected calls to ease the pace of deficit reduction and signalled that deep cuts to welfare will be needed after the next general election.
The economy’s “healing is taking longer than we hoped, because the damage was greater than we feared,” Osborne said in a speech today at the Conservative Party conference in Birmingham, central England. “But let the message from this conference be clear: we will finish the job we have started.”
Osborne compared his task to that of Margaret Thatcher during the early 1980s recession as he vowed he’d neither increase nor slow his budget-cutting strategy, dismissing criticism from the Labour opposition that his austerity plan had plunged the economy into a double-dip recession. He also rejected calls from his Liberal Democrat coalition partners to raise more money from the wealthy through a so-called mansion tax on the most expensive homes.
“Just as we should never balance the budget on the backs of the poor, so it’s an economic delusion to think you can balance it only on the wallets of the rich,” Osborne said. “We won’t have some kind of temporary wealth tax” and “nor am I going to introduce a new tax on people’s homes.”
The chancellor confirmed the government will press ahead with plans to cut 10 billion pounds ($16 billion) from the welfare budget in the two years following the 2015 general election and reduce spending by most other departments as it extends Britain’s austerity program into a seventh year.
The Treasury is seeking to extend spending reductions across government departments as a 2010 effort to rid Britain of its budget deficit by 2015 is pushed back a further two years. Britain spends more than 200 billion pounds a year on welfare, accounting for 30 percent of total government spending.
The Treasury said in March that welfare cuts of 10 billion pounds are needed by the fiscal year that runs through March 2017 on top of the 18 billion pounds of savings already announced. The economic slump has left Osborne on course to miss his self-imposed deadline to start bringing down the burden of government debt by 2015.
“Osborne’s speech shows he is in complete denial about the failure of his plan,” Rachel Reeves, who speaks for Labour on Treasury affairs, said in an e-mailed statement. “The reason why George Osborne has been forced to talk about billions more cuts into the next Parliament is because his failure to deliver economic growth means he will break his promise to balance the books by 2015.”
Taxes on Rich
Rejecting criticism that his government is favoring the wealthiest, Osborne argued that the rich are paying a greater share of tax than at any time under the previous Labour government and defended his decision to scrap the 50 percent top rate of income tax in his March budget, calling it “cripplingly uncompetitive.”
“It is a completely phoney conception of fairness that you stick with a tax rate you know raises no money, that you know drives away jobs and investment, that you know weakens the economy, just to say you’ve kicked the rich,” he said.
Signaling further cuts to welfare benefits such as housing support, Osborne said that the government faces “serious decisions” about what spending decisions to make. He also pledged a new crackdown on tax evasion and aggressive avoidance.
The government’s spending plans have given it “the credibility that each day earns us record low interest rates in the world’s bond markets,” he said. “We must now take some very serious decisions about what we do after that.”
Osborne said the government will introduce new measures to help support enterprise, including the chance for staff to give up some of their employment rights in exchange for shares in their firms.
In plans out for consultation, companies will be allowed to offer existing employees the chance to waive certain employment rights in return for between 2,000 and 50,000 pounds of shares. That holding would then be exempt from capital-gains tax. The proposed employment rights are protection from unfair dismissal, redundancy pay, and the right to request flexible working. Mothers would also be asked to give 16 weeks notice of their plans to return from maternity leave.
“Get shares and become owners of the company you work for,” Osborne said. “Owners, workers, and the taxman, all in it together. Workers of the world unite.”
Osborne also said the Treasury is looking at reducing tax on shale gas.
“We’re consulting on a generous new tax regime for shale gas, so that Britain is not left behind as gas prices tumble on the other side of the Atlantic,” Osborne told the conference.
Osborne began his speech by invoking the Conservative government of Thatcher in 1981, which two years into office vowed to stick to its economic policies including deep budget cuts at a time when unemployment was rising after a two-year recession.
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