U.K. aims to control deficit with big cuts

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Kai Ryssdal: Austerity, in the sharpest sense, is the economic buzzword in the U.K. today. The new government over there unveiled its first budget this morning.

From London, Marketplace’s Stephen Beard reports.

Stephen Beard: Today, Britain’s new Finance Chief George Osborne began wielding the ax.

George Osborne: This budget is needed to deal with our country’s debts. This budget is needed to give confidence to our economy. This is the unavoidable budget.

He’s imposing a sharp increase in sales tax, deep cuts in welfare benefits and public services. The opposition Labour Party said this would stifle growth and “throw people out of work.” But financial markets were impressed; they liked the government’s pledge to wipe out Britain’s budget deficit within five years.

David Buik is with BGC Brokers.

David Buik: This was a really clever budget, because it was well presented. It was austere, but it offered hope. And it was clearly well thought out.

One measure was generally popular. The government promised to levy a tax on all large banks operating here. This should raise around $3 billion a year.

Banking analyst Michael Prest says Britain’s largest European partners are following suit.

Michael Prest: They put out a joint statement today saying that the British have announced their specific proposal first, but over the summer, France and Germany are almost certainly going to follow with some comparable measures.

Britain’s finance chief said the crisis started in the banking sector and so it’s only right that the banks contribute to deficit reduction and recovery. Britain, Germany and France are now urging the U.S. to slap a similar levy on American banks.

In London, this is Stephen Beard for Marketplace.