Britain faces first Conservative budget in two decades
British Prime Minister David Cameron’s government will this week unveil the first Conservative budget in almost 20 years, targeting deep welfare cutbacks to honour a campaign pledge to slash spending.
Finance minister George Osborne, boosted by a surprise May 7 vote giving his centre-right Conservative Party an outright majority, will present his latest spending and taxation plans before parliament on Wednesday.
Osborne will have a free hand with public finances after five years of coalition with the centrist Liberal Democrats, while the summer budget comes amid mounting global concern over the debt crisis in anti-austerity Greece.
Chancellor of the Exchequer Osborne has already vowed that his second budget so far this year will unleash more austerity to raise another 12 billion pounds (US$19 billion, 17 billion euros).
“You do have to look at the benefits system, the welfare system, and make sure that it is fair for working people,” Osborne said Sunday. “It is not fair that people out of work can earn more than people in work so we are going to cut the benefit cap.”
He will seek to cap annual welfare payments at 23,000 pounds per household in London, against the current level of 26,000 pounds. The amount will be lower still outside the capital.
Osborne has also said that Britons on higher incomes in subsidised council housing will have to pay closer to the market level of rent. The Conservatives want to lower the tax burden, but also address concerns that the welfare system encourages a culture of state handouts.
Wednesday’s budget will seek to build upon Osborne’s 2015/2016 annual budget that was presented under the previous coalition administration in March.
It will also be Britain’s first Conservative budget since 1996, when former premier John Major was in power.
During the coalition years, Osborne was forced to soften some of his austerity measures in the face of fierce pressure from the Lib Dems.
However, Osborne’s priority remains tackling Britain’s total debt, which stands at about 1.5 trillion pounds, with a deficit of around 4.0 per cent of GDP in the current 2015/2016 financial year.
The Conservative-Liberal Democrat coalition, which rose to power in 2010, oversaw billions of pounds of cuts to state spending to slash a record deficit inherited from the previous Labour government.
The coalition had already promised the public purse would reach a surplus by 2018/2019. The economy is forecast to grow by 2.5 per cent this year and 2.3 per cent in 2016, bringing higher taxation revenues.
“The UK economy is showing an enviable combination of decent growth, low inflation and falling unemployment,” said Deloitte chief economist Ian Stewart.
