Last updated: October 20, 2010 2:46 pm
The UK’s Conservative-led coalition has ushered in a new era of public sector austerity in Britain, outlining plans for £81bn ($128bn) in cuts to government spending which far outstrip measures taken by other major advanced economies.
Declaring that “today is the day where Britain steps back from the brink”, George Osborne, the chancellor of the exchequer, revealed dramatic reductions to several key departments over the next four years, a £7bn fall in welfare support and confirmed that about 490,000 jobs will be lost in the public sector by 2014-15.
Saying that job losses were “unavoidable when the government runs out of money”, Mr Osborne insisted that the coalition government would protect most of the schools budget and maintain its on health and overseas aid.
“Tackling the Budget deficit is unavoidable,” Mr Osborne told parliament. “To back down now and abandon our plans would be the road to economic ruin.”
Hundreds of London-based diplomats will be made redundant as part of the budget cuts, while the BBC will take on the full cost of running the World Service, which has been subsidised by the Foreign Office.
The BBC itself has agreed to a funding cut of at least £340m, or one-tenth of the licence fee which is levied to fund its services. The cuts are the equivalent to all its national radio services combined.
Local government will suffer more than most with reductions of nearly 30 per cent by the end of the parliament in 2015, while the Home Office and Foreign Office will see their budgets reduced by 24 per cent. Additionally, the police force will see its budget trimmed by 16 per cent.
Two areas – the £4.6bn science budget and overseas aid, which will reach 0.7 per cent of GDP by 2013 – had their spending protected.
Mr Osborne insisted that the government’s levy on banks’ balance sheets would raise more each year than the bankers’ bonus tax. Introduced by the previous Labour government, the levy raised last year about £2bn in net terms.
He confirmed that the government was raising the state pension age to 66 from 2020, with ages starting to rise in 2018. An attempt by France to raise the pensionable age from 60 to 62 has led to paralysing strikes.
On Tuesday cuts of 8 per cent to the defence budget were laid out separately in the strategic defence review. The Ministry of Defence and the armed forces are facing cuts of 42,000 jobs by 2015.
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