Britain prepares for deep cuts in public spending

TEXT OF INTERVIEW

STEVE CHIOTAKIS: Britain is preparing to make the deepest cuts in its public spending in more than half century. Later today, the U.K.’s finance chief will unveil
budget cuts worth more than $130 billion. Marketplace’s Stephen Beard is with us live from London with the latest.

STEPHEN BEARD: Hello Steve.

CHIOTAKIS: So what’s the significance of this move?

BEARD: Well, Britain is the first big country since the financial crisis to tackle its budget deficit in a really drastic way. The U.K. deficit is about 10 percent of GDP — not the biggest in the world. In fact, the U.S. deficit is probably bigger now. But these cuts will be watched closely by other big, heavily-indebted countries that may soon have to tackle their own deficits as well, not least the United States.

CHIOTAKIS: Do we know, Stephen, precisely where the ax is going to fall?

BEARD: We already know that defense spending is going to be cut by 8 percent. Welfare is going to take a huge hit. For example the amount of money to help poor people with their housing likely to be cut in half. Probably the biggest impact, though, will be seen in employment. The government expects almost half-a-million public sector jobs will be lost through these cuts. Now, the government hopes the private sector will rise to the challenge and create that many extra jobs, but there’s an obvious risk here. And critics of the cuts say they’ll be counterproductive. They’ll tip Britain back into recession, and that won’t reduce the deficit, it’ll make it worse.

CHIOTAKIS: Marketplace’s Stephen Beard, in London. Stephen, thank you.

BEARD: OK, Steve.