Bloomberg News
U.K. Chancellor of the Exchequer George Osborne will today set out his plan for the economy, holding out the possibility of tax cuts funded through more welfare savings.
In a speech in central England, he will say that while the economy is improving, sticking to his deficit-reduction program remains vital to keep interest rates low. He told BBC Radio 4 today that a further 25 billion pounds ($41 billion) of government-spending cuts will be needed after the 2015 general election.
'We've got to make more cuts,' Osborne will say, according to extracts released by the Treasury. 'There is still a long way to go, and there are big, underlying problems we have to fix in our economy.'
Prime Minister David Cameron told the BBC yesterday that any future tax cuts would be targeted 'at the lowest-paid.' Though unemployment has fallen and the recovery taken hold, the Tories are still trailing the opposition Labour Party in the polls, with the latter arguing the rising cost of living is eroding the benefits of the faster growth.
Osborne will say that any permanent tax cuts would have to be funded from reductions in spending.
'Osborne should admit his policies have failed and led to a cost-of-living crisis,' Chris Leslie, a lawmaker who speaks for Labour on economic affairs, said in an e-mailed statement.
Welfare Cuts
The Institute for Fiscal Studies said last month a further 12 billion pounds of welfare reductions are needed to avoid deeper cuts to government departments between 2016 and 2019. Without squeezing welfare, the amount spent on public services would have to fall to its lowest share of national income since 1948, the London-based research group said.
In his Autumn Statement on Dec. 5, Osborne set out plans to return the budget to surplus in 2019 for the first time since 2001. He has cut welfare by more than 20 billion pounds since taking office in 2010 and is proposing to introduce a cap on 100 billion pounds of social-security spending, excluding state pensions.
The U.K.'s fiscal watchdog last month raised its forecast for economic growth in 2014 to 2.4 percent from 1.8 percent and said government borrowing would be less than previously predicted. Bank of England Governor Mark Carney has acknowledged that the recovery has 'taken hold.'
Tory Losses
Nevertheless, support from within Tory ranks has waned. A poll published two days ago found that 37 percent of voters who backed the Tories in the 2010 election no longer support the party, and half of them had defected to the anti-European Union U.K. Independence Party. That's in spite of the fact that Cameron still outpolls Labour leader Ed Miliband on personal approval and economic management, according to the survey commissioned by Conservative upper-house lawmaker Michael Ashcroft.
Osborne will also say immigration needs to be reduced, as uncontrolled immigration brings pressure on public services and leads to abuses of the welfare system. The Sunday Times published a leaked Home Office paper last month suggesting Home Secretary Theresa May favors a cap on migration from the European Union of 75,000 a year.
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
Posted by Unknown on Monday, January 6, 2014 - Rating: 4.5
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