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After months of bitter negotiations, Conservative finance minister George Osborne confirmed he would press ahead with almost all the spending cuts he had outlined in a June budget.
Capital spending, however, he said would be £2 billion higher than a year originally planned because of the difficulty of getting out of contractual obligations.
“Tackling this budget deficit is unavoidable. The decisions about how we do it are not. There are choices. And today we make them. Investment in the future rather than the bills of past failure. That is our choice,” Osborne told parliament.
Split views
Economists are split between those who say the drastic action is needed and those who argue it will tip Britain back into recession. Almost all agree, however, that growth will slow and the Bank of England (BoE) will have to keep monetary policy super-loose for the foreseeable future.
Sterling trims gains against the dollar and slipped versus the euro on Wednesday and some analysts linked the move to Osborne reiterating plans to impose a levy on banks.
Osborne said that the state pension age for men and women will rise to 66 by 2020. “Raising the state pension age is what many countries are now doing, and will by the end of the next parliament save over £5 billion in a year.” He said he would also cut a further £7 billion off the welfare budget on top of the 11 billion pounds of reductions he identified in June. Around 4,90,000 public sector jobs were likely to disappear over the next four years.
Unions have already decried the likely job losses. But public opposition to the cuts in Britain has so far been muted compared with France, where unions are trying to force a retreat on pension reform with protests including blockades of fuel depots. There have also been protests against the austerity budget that Spain’s parliament is due to approve on Wednesday.