Britain premier's first act: Salary cut for ministers

The centre-right Conservatives and smaller centrist Liberal Democrats this week agreed on what critics call an unstable partnership of expedience after an inconclusive election.
Reducing Britain’s record budget deficit of over 11 per cent of national output will be the first test of the relationship.

A five per cent pay cut for all ministers was agreed at the first meeting of the new cabinet on Thursday. Most senior ministers are paid more than £1,40,000 ($2,06,800) — a generous salary in Britain.

Markets are looking for signs the Conservative-led coalition will quickly implement a plan to tackle the £163-billion ($243 billion) deficit by trimming public spending, initially by £6 billion this financial year.

“We are all very aware of the seriousness of the situation and frankly if we don’t have a credible programme to reduce the deficit... then we won’t have the confidence of the markets and the confidence of the country,” Culture Secretary Jeremy Hunt told reporters after the hour-long meeting. The government has promised an emergency budget within 50 days. Cameron said on Wednesday the government had the worst economic inheritance of modern times in Britain. Economists quoted by British media said they also expected a rise in the VAT sales tax from the current 17.5 per cent.

The head of British supermarket group J Sainsbury said on Thursday that consumer spending would remain subdued and the focus should be on spending cuts rather than raising taxes to clean up finances.

“If the government does decide to increase VAT, they should give us good notice and they should be firm on the fact that that is going to stick for a very long time,” King told BBC radio.

“We don’t want to see VAT swinging around in an uncertain and unpredictable way. It’s very costly and complex for retailers to change VAT.”

Other legislation expected on the agenda soon is a plan for a banking levy, a commission to investigate separating retail and investment banking and plans to give the Bank of England more clout as a financial watchdog.