Osborne Warns of Spending Cuts as U.K. Faces Uncertain Times

  • Budget to set out more public spending cuts through 2020
  • Revenue to come from bank profit tax, insurance premiums

U.K. Chancellor of the Exchequer George Osborne started the week of his eighth budget by warning that he must set out more austerity measures as economic conditions remain difficult.

"My message in this budget is that the world is a more uncertain place than at any time since the financial crisis," Osborne told the BBC’s "Andrew Marr Show” on Sunday. "We’re going to have to make further savings."

Osborne has indicated some savings in the budget to be unveiled Wednesday will come from further public-sector spending cuts. Revenue-raising measures may include getting an extra 6 billion pounds ($8.6 billion) from the levy on bank profits, according to the Sunday Times, as well as by selling assets of rescued lender Bradford & Bingley, as reported by Sky News. Transport lobby groups also said Osborne may seek to increase insurance premiums, while analysts expect the excise duty on cigarettes to go up.

The chancellor refused to identify specific savings, and instead echoed his intention, set out in an article written for the Sun on Sunday newspaper, to stick to his deficit-cutting path even as economic risks intensify. He told Marr that the cuts would be "equivalent to 50 pence in every 100 pounds" of public spending by 2020, "not a huge amount in the scheme of things."

Budget Surplus

A law passed by his own Conservative government requires Osborne to propose a budget with a surplus by the end of the decade. This has sparked criticism the chancellor has limited his room to maneuver in Wednesday’s budget, while a June 23 referendum on European Union membership has forced him to drop measures that may spark controversy among voters or within the party.

Osborne earlier this month dropped plans to scrap some pension giveaways after giving in to pressure from the industry and some Tory lawmakers concerned that the move would anger wealthier voters.

The chancellor refused to be drawn into discussing whether he would announce an increase in the threshold at which the 40 percent rate of income tax is applied -- a Conservative manifesto pledge -- telling the British Broadcasting Corp. that while the party "will deliver" on the promise to raise it to 50,000 pounds within the current parliament, "the truth is these are difficult economic times."

Marr’s interview -- traditionally a scene-setter ahead of the budget -- devoted more time to the referendum on EU membership.

Asked if he regretted Prime Minister David Cameron’s decision on the vote, Osborne said it was "absolutely right" for Britain to confront the issue.

"I’m not for us pulling up the drawbridge and unilaterally withdrawing," he said. "This is not some political game. This is the biggest decision facing this country for 50 years."

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