George Osborne announces a further £11.5bn in cuts
The UK Chancellor of the Exchequer, George Osborne, has announced the budget cuts that will see implementation in 2015 in his spending round review.
The new spending round review will extend the deepest public spending cuts in any British peace time period until 2017-2018, a further two years more than George Osborne’s original target of 2015. The budget as it currently stands has been cut by one-third up until now but with weaker export demand from Europe, some 40% of our export trade, has seen the UK recovery dampened.
The reduction in public spending will see a real cut of 2.7% from the previous year at £11.5 billion reduced through fiscal means. That number comprises a total of 144,000 public jobs to be cut from government departments by the 2015 election year.
The first reduction of public funds will see cuts in defence spending in the Ministry of Defence which was the toughest negotiation for the chancellor, yet the least cut. Most of military cuts will come from reducing the employed staff within the UK military while maintaining the defensive capabilities. This allows a 2%, or £800 million, cut in the Ministry of Defence’s budget. General Peter Wall, head of the UK army, has stated that the size of the cuts dramatically reduces the chance of success in future war.
Community and local governments will be reduced by placing pressure on the Department of Communities to reduce itself by a target of 10%. Also targeted to cut itself by 10% is the Cabinet Office which controls environment, energy, transport and foreign affairs.
The Home Office, which controls immigration, security and law and order and the Business Office, which deals with legislation surrounding corporations, will both see their budget’s cut by 6%. Corporation tax is to be reduced from 21% to 20% to keep the UK’s international competitiveness through the Business Office also.
The chancellor, who would have cut welfare spending again last year if the liberal democrats had not rejected his proposal, has saved an extra £350 million by tightening the welfare belt. There will now be a seven day wait before being eligible to sign on for welfare, a proposal George Osborne defended by stating: “Those first few days should be spent looking for work, not looking to sign on.” Other than this the welfare budget has now been capped for a two-year period and ring-fenced placing a “limit on the nation’s credit card”.
In 2010 when the coalition government came to power the public deficit had peaked at 11%, the deficit now stands at 7.4% and with the new outlined budget cuts forecasts are at a deficit of 5% by 2015. The chancellor outlined that the NHS, foreign aid and education will continue to be protected and not receive a reduction in their allocated budgets.
The current debt levels as a percentage of UK GDP have now increased from 75.9% this year to 85.6% in 2015, most of this new debt will be seen as spent on infrastructure. With this all in place The Office for Budget Responsibility expects the UK’s economic recovery to be at 1.8% in 2014, 2.3% in 2015, 2.7% in 2016 and 2.8% in 2017.