Four U.K. Departments Agree to Cuts as Osborne Swings the Ax

  • Chancellor George Osborne announces first budget review deals
  • Osborne uses speech to defend goal of achieving surplus

U.K. Chancellor of the Exchequer George Osborne said four government departments agreed to budget cuts of about 30 percent over the next four years, preparing the ground for a new round of austerity to be unveiled in his Spending Review in just over two weeks.

The Treasury along with the departments responsible for transport, local government and the environment will face annual reductions of 8 percent in their day-to-day budgets, Osborne said in a speech in London Monday.

Osborne and Prime Minister David Cameron won the May general election promising to step up an austerity drive started in 2010 to bring down a record budget deficit. In his Nov. 25 fiscal statement, Osborne will detail the cuts needed to turn a shortfall of 5 percent of gross domestic product into a surplus by 2019-20, the final fiscal year of the parliamentary term. A commitment to protect departments such as health and international aid mean other ministries face reductions of up to 40 percent.

Facing Criticism

“There is no economic security, there is no national security, there is no opportunity, when you lose control of the public finance,” Osborne said. “It is only when you control spending, and live within your means, that you can build a country with security and opportunity at its heart.”

Osborne is facing criticism over his deficit-cutting plans, including from some in his own Conservative Party. Last month, unelected lawmakers in the House of Lords blocked his proposals to cut tax credits -- income top-ups for the low-paid -- and the Labour opposition is calling for him to adopt “a less excessive” surplus target.

Osborne said the weakening global economy underscores the need “not to lose our nerve.”

“A surplus will make our country more resilient, safe and secure,” he said. “It means that next time we have the money to help us through the tough times when the storms come. Let me put it another way: if our country doesn’t bring the deficit down, the deficit could bring our country down.”

The provisional savings agreed with the four departments will be achieved by further efficiencies and closing low-value programs. The cuts do not affect their capital budgets.

Cameron Support

Osborne was backed by Cameron in a speech to business leaders on Monday. Achieving a surplus is vital to reduce the share of government debt in the economy and prepare for the possibility of a “rainy day,” Cameron said.

“This government was elected on the basis on completing the job, not because we’re a bunch of cold accountants, but because we know for families to have stability we have to make sure our economy is safe and secure, which is what getting rid of our deficit is all about,” Cameron told the Confederation of British Industry annual conference.

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