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News : UK Economy Last Updated: Oct 21, 2010 - 5:48:50 AM


UK chancellor announces planned spending cuts of £83bn; Up to 490,000 public sector jobs will be cut by 2015
By Finfacts Team
Oct 20, 2010 - 2:17:56 PM

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UK Chancellor George Osborne today announced the start of an era of public sector austerity, with planned spending cuts of £83bn in his comprehensive spending review. Up to 490,000 public sector jobs will be cut by 2015.

Britain's budget deficit currently stands at 11% of GDP, the highest in the G7 group of industrialized nations and public sector net borrowing came in at £15.6bn last month, up from £14.8bn a year earlier, the Office for National Statistics (ONS) said today.

The government is to slash welfare benefits by a further £7bn in the biggest fiscal consolidation since the Second World War.

The pension age will rise and a new bank levy is also planned with full details due on Thursday.

Osborne said the four year cuts were guided by fairness, reform and growth.

The 19% average cuts to departmental budgets were less severe than the 25% expected - due to bigger savings from the welfare budget, the chancellor told MPs.

Announcing the review in the House of Commons, Osborne said: "Today is the day when Britain steps back from the brink, when we confront the bills from a decade of debt."

He added: “Tackling the Budget deficit is unavoidable ... To back down now and abandon our plans would be the road to economic ruin.”

Cuts in departmental budgets by the end of the current parliament include 30% in local government costs, while the home office, justice department and foreign office will face cuts of 24%.

Key points:

  • About 490,000 public sector jobs likely to be lost
  • Average 19% four-year cut in departmental budgets
  • Structural deficit to be eliminated by 2015
  • £7bn in additional welfare budget cuts
  • Police funding cut by 4% a year
  • Retirement age to rise from 65 to 66 by 2020
  • NHS budget protected; £2bn extra for social care
  • Schools budget to rise every year until 2015
  • £30bn capital spending on transport
  • Permanent bank levy

Osborne said: "We have, at £109bn, the largest structural budget deficit in Europe.

This at a time when the whole world is concerned about high deficits, and our economic stability depends on allaying those concerns.

We are paying, at a rate of £120 million a day, £43 billion a year in debt interest.

Next year, current expenditure will be £651 billion, then £665 billion the year after, £679 billion the year after that, before reaching £693 billion in 2014-15.

The House will note that current spending is rising not falling over this period."

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© Copyright 2010 by Finfacts.com

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