Devastating budget cuts to hit Britain
Chancellor of the Exchequer George Osborne (R) walks from Number 10 Downing Street with Danny Alexander Chief Secretary to the Treasury after attending a Cabinet meeting in Downing Street on October 20, 2010 in London, England. The Chancellor of the Exchequer George Osborne is set to announce the coalition government's spending review in Parliament. The review is designed to tackle the country's deficit and will outline swingeing cuts throughout the whole of the public sector with many public sector jobs set to be axed and budgets significantly reduced.
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Kai Ryssdal: In the U.K. today, the news was all budget deficit all the time. This morning the Brits became the first major economy to launch a big deficit reduction program.
The government unveiled cuts of more than $130 billion. 500,000 public sector jobs.
Proportionally, way deeper than anything that's being talked about over here.
From London, Marketplace's Stephen Beard reports.
George Osborne: Today is the day when Britain steps back from the brink.
Stephen Beard: In a stormy House of Commons, Finance Chief George Osborne laid out the deepest budget cuts for more than a half a century. He said they're needed so that Britain's public debt does not spiral out of control.
Osborne: And that we do not saddle our children with the interest on the interest on the interest of the debts that we were not prepared ourselves to pay.
At about 10 percent of GDP, Britain's deficit is a bit smaller than America's. But the cuts are roughly four times tougher than anything the U.S. is even contemplating. A total of $28 billion will be stripped from Britain's welfare budget. 490,000 public sector posts will go -- that, by the way, is the equivalent of 2.5 million jobs in the U.S.
Keith Fletcher is a local government worker, and he's furious.
Fletcher: I think the public sector are being made to pay the price of the banking sector's mistakes in the past.
Defending the cuts in a noisy House of Commons, Prime Minister David Cameron made no apology for the loss of public jobs.
David Cameron: If we don't tackle the deficit, if we don't tackle the deficit, every job in this country is at threat. That's the point.
The government says that without this drastic action, Britain could face the same kind of debt crisis as Greece and Ireland. But some independent analysts say the cuts are a massive gamble since public spending now accounts for almost half the British economy.
Martin Wolf is the chief economics commenator of the Financial Times.
Wolf: A retrenchment on this scale, this quickly looks excessive, is likely to have a very negative effect on growth. And that will mean that the actual fiscal deficit won't improve as much as they think.
If the economy actually contracts, the deficit could worsen. The government hopes the private sector will come to rescue and create hundreds of thousands of new jobs. Many other countries with big deficits -- like the U.S. -- will be watching Britain to see what happens next.
In London, this is Stephen Beard for Marketplace.