Britain unveils severe emergency budget cuts

An "end" road sign hangs outside Parliament in London, England.

TEXT OF INTERVIEW

Steve Chiotakis: The British government just unveiled an emergency budget. It's the harshest budget for the U.K. in more than three decades, and could be a sign of things to come in the United States. Marketplace's Stephen Beard is with us live from London this morning with the latest. Hi Stephen.

Stephen Beard: Hello, Steve.

Chitoakis: So what cuts have they spelled out?

Beard: Well the most controversial of them is actually a sales tax increase to 20 percent, up 2.5 percent. That's not going to be popular. But in addition, there's a freeze on certain wellfare benefits, and a two-year freeze on public sector pay. That, incidentally, will hit the Queen. She'll have to scrape by with her annual allowance unchanged at $11 million.

Chiotakis: Wait wait wait, no raise for the Queen? Are things really that bad in Britain, Stephen?

Beard: Well not as bad as Greece, but we still have one of the highest deficits in Europe here, around 10 or 11 percent. And the Greek crisis has persuaded governments across Europe to tackle their deficits now before they find it more difficult and perhaps impossible to borrow.

Chitoakis: And how does this British plan, Stephen, walk this tightrope between making the needed cuts and not cutting too much?

Beard: Well this is a major concenr, and not just here in the U.K., also in the U.S. Here's Philip White, who analyses the European economy for the Center for European Reform:

Philip White: The United States is very worried about the general direction of European policy, and is worried that this sudden pan-European withdrawal of fiscal stimulus could have very negative consequences for the world economy as a whole.

And analysts say the U.S. won't just be fretting about the global reprocussions. The U.S. itself will have to cut its deficit at some stage, so it'll be watching what happens in the U.K. especially with particular interest.

Chitoakis: All right, Marketplace's Stephen Beard joining us from London. Stephen, thanks.

Beard: OK, Steve.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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