London:
Seeking to free itself of crushing debt, the British government unveiled the country's steepest public spending cuts in decades on Wednesday, sharply reducing welfare benefits, raising the retirement age earlier than planned and eliminating almost half a million public sector jobs over the next four years.
"Today is the day when Britain steps back from the brink," George Osborne, the Chancellor of the Exchequer, as Britain's top finance minister is known, told Parliament as he laid out an ambitious and potentially risky plan to reduce debt.
The program is a center-piece of the coalition government, which blames the country's economic malaise on its Labour predecessor under former Prime Minister Gordon Brown. The cuts are so momentous that they could determine the coalition's fate as Britons face politically-charged austerity after years of growing prosperity before the financial meltdown in 2008.
"It is a hard road but it leads to a better future," Mr Osborne said. "To back down now would be the road to economic ruin."
He said that 490,000 public sector jobs would be lost over the four-year savings program and the size of government departments in London would be cut by one third. Public spending would be cut by a total 83 billion pounds, or around $130 billion, by 2015.
Mr Osborne said the authorities planned to save 7 billion pounds a year on welfare payments by measures including the imposition of a new 12-month limit on people drawing some forms of long-term jobless benefits. Measures would be taken to curb benefit fraud and simplify the benefit system. Additionally, other welfare payments would be limited to 500 pounds a week for couples and families and 350 pounds for single adult households "so that no workless family can receive more in welfare" than working households with median incomes.
Mr Osborne said an increase in the official retirement age from 65 to 66 would start four years sooner than planned, in 2020, saving 5 billion pounds a year. Britain has already said it will restrict once-universal child benefit payments to people earning less than around $70,000 a year.
Britain's public deficit is one of the highest among developed economies, running at 11.5 per cent of its total economic output, compared to 10.7 per cent for the United States and 5.4 per cent for Germany. The debate that has seized Britain in advance of Wednesday's announcement center around the question of whether deep cuts in spending would slow recovery, leading to a so-called double-dip recession.
Public sector positions in Britain number around six million, or, about one fifth of all jobs, according to the most recent figures from the Office for National Statistics. But it was not clear what the impact of shedding 490,000 of them -- about eight per cent of the total -- would have on unemployment. Mr Osborne said private companies would be expected to employ more people as the economy emerged from the doldrums.
Mr Osborne promised savings of an annual 7.1 percent in the budgets of local government councils and said there would be a freeze followed by a 14 percent cut in tax funds allocated to maintaining the royal household of Queen Elizabeth II. Public housing tenants, he said, would face higher rentals closer to the market rates for private housing. Defense spending would be cut by 8 percent by 2014, he said, but he promised not to reduce spending on British forces in the Afghanistan war.
But, he said, the National Health Service -- one of the most politically-sensitive institutions in Britain -- would be allocated more funds rather than less to meet a Conservative election pledge. He also said the "resource money" for schools would increase "in real terms" every year.
Spending on police would be cut by 4 percent a year, he said, but spending on intelligence and security agencies would be strengthened to guard against terrorism and protect London during the 2012 Olympic games. He also promised to spend 900 million pounds on measures to curb tax fraud, which cost the tax service some seven billion pounds a year.
Mr Osborne said Britain's diplomatic corps -- the Foreign Office -- would lose 24 per cent of its funds by cutting the number of diplomats at the head office in London. Additionally, the BBC would take over funding the BBC World Service, saving the government 340 million pounds a year, while the BBC's own mandatory license fee levied on owners of television sets would be frozen for six years.
"We have had to make choices, choices in the things we support," he said. "We have taken our country back from the brink of bankruptcy." The average cut in the budgets of government departments, he said, would be 19 per cent, not 25 per cent as he had initially threatened.
He said a temporary tax on bank balance sheets would be made permanent to raise billions of dollars. Many Britons, like Americans, are angry with big banks perceived in the public eye as leading the world into crisis only to be rescued by tax-payers and reverting to a culture of bonuses and avarice. Mr. Osborne said the government would seek to extract "the maximum sustainable taxes" from financial institutions.
In June, Mr Osborne also unveiled an increase in value-added tax next year that will increase the cost of many basic transactions.
The deficit is the biggest economic challenge facing the coalition government made up of the dominant Conservatives of Prime Minister David Cameron and the junior Liberal Democrats.
Mr. Cameron has argued that, without radical and rapid measures to cut the 156 billion pound deficit, the country will face unbearable interest payments, but the opposition says measures to reduce the debt should be more restrained so as to permit growth and preserve jobs.
The austerity program has already raised the possibility of protests similar to those in France. But, while a million French people took to the streets on Tuesday to protest plans to increase the minimum retirement age from 60 to 62 years, only around 2,000 labor union members joined a march in Britain on the same day in advance of Mr Osborne's announcement.
Nonetheless, a former Conservative government minister, Norman Fowler, has said the government's cuts could provoke a long period of demonstrations, protests and strikes.
The cuts, far more detailed and sweeping than those in many other Western nations, were depicted by the opposition as a reckless gamble that could tip the country back into recession. Alan Johnson, the opposition Labour finance spokesman, told Parliament: "Today's reckless gamble with people's livelihoods runs the risk of stifling the fragile recovery."