Osborne Spending Cuts Could Weigh on U.K. Growth, OECD SaysJillian Ward
Chancellor of the Exchequer George Osborne’s plan to erase Britain’s budget deficit by 2018 risks weighing on the economic recovery and hitting the vulnerable, the Organization for Economic Cooperation and Development said.
“It is important that adjustment measures that are yet to be defined be fair,” the Paris-based organization said in a report published Wednesday. “Making the profile of fiscal consolidation more gradual by extending it beyond 2018 would lower its impact on growth.”
Osborne is seeking to turn a deficit of almost 5 percent of gross domestic product into a small surplus by 2018-19 by stepping up the pace of spending cuts. Of the 30 billion pounds ($46 billion) of savings required, 12 billion pounds is set to come from welfare.
Measures include lowering the cap on the total amount of state support a family can receive per year to 23,000 pounds and freezing working-age benefits such as tax credits and child support for two years starting in 2016. Further details of where the ax will fall may emerge in the July 8 budget.
The deficit is set to fall by 3 percent of GDP in 2016 and 2017, the OECD said. Despite low productivity, the economy will grow 2.4 percent this year and 2.3 percent in 2016, with private consumption and investment being the main engines.
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