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U.K.’s plan to cut deficit gains criticism

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Bill Radke: The British government will announce a plan to cut the U.K.’s massive budget deficit. The first step would involve selling off state-owned assets worth around $25 billion. But the plan has already been widely criticized as inadequate, and perhaps politically motivated. Let’s bring in Marketplace’s Stephen Beard from London. Good morning, Stephen.

Stephen Beard: Good morning Bill.

Radke: So what is the U.K. government planning to sell?

Beard: A ragbag of publicly-owned assets, including the government’s share in the Channel Tunnel rail link between the U.K. and France. There’s a stake in a nuclear firm which enriches uranium. Plus some real estate, raising — as you say — a total of $25 billion over the next two years to reduce the budget deficit.

Radke: OK, $25-billion ragbag. And how does that compare to the U.K. budget deficit?

Beard: Well that’s the problem. It is one of the worst in the developed world. It’s rapidly approaching $280 billion. As a percentage of the U.K.’s GDP, that’s expected to be worse even than the U.S. budget deficit. Critics say $25 billion is just a drop in the ocean. And it’s a one-off. You reduce the deficit by that amount in year one, but it doesn’t reduce the deficit in the following years.

Radke: OK, and real quickly Stephen, any other interesting reaction to this little sell off?

Beard: Generally it’s been rather negative. I mean, the government has been described here as reacting in a desperate fashion. It’s sort of thrashing about. It’s way behind in the opinion polls. It faces a general election next year. And the main opposition, conservative party has just unveiled plans to tackle the deficit with deep cuts in public spending, cut in certain benefits, pay freeze for civil servants and so on, and they’ve got a lot of credit for dong that — for spelling out what could be a rather unpopular policy before the election. Now commentators are saying that the government is hoping to show that it can cut the deficit less painfully, with less damage to Britain’s welfare state.

Radke: Marketplace’s Stephen Beard joining us live from London. Stephen, thank you.

Beard: OK Bill.

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