Osborne Readies Ground for More Spending Cuts in U.K. Budgetby and
U.K. chancellor says economy `not as big as we had hoped'
Britain has to live within its means, Osborne tells BBC
Chancellor of the Exchequer George Osborne warned he may make further cuts in public spending in his annual budget on March 16 after data showed Britain’s economic recovery is not as advanced as he hoped.
Osborne will seek further “efficiencies” in government departments before making cuts to services, he said in an interview on Thursday with the BBC in Shanghai, where he is attending a meeting of Group of 20 finance ministers and central-bank heads. This puts the chancellor at odds with the G-20’s pledge to use fiscal policy flexibly to support growth, according to a draft statement obtained Saturday by Bloomberg News.
“The storm clouds are clearly gathering in the world economy and that has a consequence for lots of countries including Britain. Now, we are weathering it better than most but we’ve just had confirmation that our own economy is not as big as we had hoped,” Osborne said. “We may need to undertake further reductions in spending because this country can only afford what it can afford.”
The need for more cuts would be a setback for Osborne, who has built his reputation -- and pinned his hopes of succeeding David Cameron as prime minister -- on Britain’s economic recovery since he became chancellor in 2010. Britain’s growth has outstripped most of its peers as Osborne pursued a policy of cuts to services and public-sector job reductions in a bid to trim what was a record budget deficit. That also goes against the G-20 finance chiefs’ pledge in Shanghai to use monetary, fiscal and structural tools to support economic growth.
Still, data published by the Office for National Statistics Thursday showed growth is now being almost entirely driven by consumer spending. While the economy expanded 0.5 percent in the fourth quarter of 2015, exports declined for the second straight three-month period and business investment fell the most in almost two years. ONS public-finance figures last week suggested Osborne may struggle to avoid overshooting his deficit forecast for the fiscal year ending in March.
“We’ve got an economic plan that says we spend what we can afford as a nation and so we are going to have to look at public expenditure again,” Osborne said. “We’ll do that in the budget because I’m absolutely determined that first and foremost in this uncertain time we have economic security. That’s what people rely on.”
The global economy has become “more difficult” in the past two months, the chancellor said, emphasizing his view that economic security can only be achieved by Britain spending within its means. He didn’t give details of where the ax will fall.
“We’ll set it out if we need to how we’ll reduce spending, but the first place I look to is further efficiencies in government,” he said. “There are always ways to make government better, always ways to make sure that the taxes of people are better spent.”