March 22nd, 2011
07:33 PM GMT
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One of the best bits of theater that plays out in the British parliament every year is when the Chancellor of the Exchequer (Finance Minister) stands before the House of Commons and announces the following year's Budget.

George Osborne will do this on Wednesday afternoon, less than a year after his Conservative Party came to power promising a massive five-year deficit reduction plan.

But this is not Osborne's first Budget speech. He fronted the new government's "Emergency Budget" in June last year. Following that speech and last October's spending review, the British public now know what's in store until2015: Austerity.

You would hardly know it, yet.

But the pain is coming. While last year's violent demonstrations over the rise in university fees are the most obvious sign of distress, a massive march through London on March 26 will set forth the complaints of the public sector. The promise of more than 100,000 demonstrating against cuts in jobs and social services will come just as those deep cuts start to bite across the country.

Any hopes that Osborne would listen to the Labour opposition and ease off on the cuts will be dashed Wednesday afternoon.

The government says it plans to cut the budget deficit from 10% of gross domestic product to just 1% by 2015. It notes the interest on the structural deficit is about the same as the country's entire transport budget, so think what could be afforded if the deficit and debt are slashed.

But unlike many other parties on the right, the Conservatives are also increasing taxes. The biggest hike - raising Value Added Tax (national sales tax) to 20% - started back in early January. Soon the tax on income that goes to pensions will jump, and the top tax rate will likely stay high at 50%.

There is even talk the chancellor will study a new tax on the rich who fly on private jets (seen by many as a mere gesture I might add).

Still, local governments around the country are already announcing coming cuts on services like libraries and care centers for elderly and children, the kind of cuts that upset voters, even if they don't want taxes to rise further. Some measures like taxing rich non-domiciled foreigners and cutting the amount of social welfare payments people can receive, have their supporters and critics, but they will remain.

The interesting thing is, the government says it's not cutting spending by as much as the 25-30% you read about. It's slowing the increase in spending over four years.

Deutsche Bank for one wrote in a recent note that talk of deep cuts "is simply not true. Total managed spending is actually projected by the government to rise during every year of the forecast. The cuts may therefore not be as bad as is commonly thought."

According to Ernst & Young the government has actually already seen a rebound in tax revenues. The chancellor said this weekend that on Wednesday he won't have to ask for more money or extra spending cuts than those already planned.

But the government's plans for 2011-2015 count on many factors it really can't control; economic growth at home and abroad, interest rates, inflation, employment, etc. Other governments will be watching to see if Britain, which had negative growth in the fourth quarter, can remain austere in the face of strikes and worries of another recession.



soundoff (11 Responses)
  1. TheOldOne

    Bankruping the country is an apparently inevitable outcome of liberal politics. Future generations have to produce what politicians use to bribe the lowest common denominator with today. It's time that the wisdom of the voter – measured in age, knowledge and the amount of tax paid – be reflected in the value of the individual's vote. Then the abilities that generated the tax can be applied in deciding how best to apply it.

    March 23, 2011 at 2:17 am |
  2. Streaky

    The tax on private jets isn't intended as a simple "gesture" the idea is to offset tax on flights for normal travelers and to stop companies buying jets to avoid paying the aforementioned tax. It actually makes a lot of sense from many perspectives.

    As for the saturday protest which I will be attending, the 100k figure is the public sector union estimates, it discounts people like me who have no union affiliation but will be attending anyway. Who knows how big it could be in the end.

    March 23, 2011 at 2:34 am |
  3. Paul Scothern

    One person's austerity is another person's pruning of an overgrown state

    March 23, 2011 at 7:45 am |
  4. Marney

    That is a look of a very rich and arragant man that does not care about the average Britain, only of himself and his rich croneys.

    March 23, 2011 at 7:52 am |
  5. James

    Great Britain does face some tough times ahead, and it is somewhat consoling to have a PM who will make the tough choices to get through those tough time. Britain's is not nearly as dire as the United States, however, who are already bankrupt. The United States is the largest debtor in the world, and soon will not be able to afford even the interest on its debts. Recently, the US government, in response to the financial crisis, simply absorbed billions of dollars of toxic debt from companies like GM and Fannie May. The ONLY factor that is preventing the US from defaulting on its debts right now, today, is the fact that at this time the US dollar is the world's reserve currency. If it is in trouble, the US just prints more money. As soon as the world moves toward another reserve currency, the US dollar, economy, and status as a first world country will collapse like a house of cards.

    March 23, 2011 at 11:26 am |
  6. Max Nex

    We only have to wait to see if Britain will go the same way as some Arab countries, widespread disorder and strikes as the people become fed-up with no jobs and no money.

    The rich REALLY get richer, the poor, poorer and the government does not give a dam.

    March 23, 2011 at 12:47 pm |
  7. Kong

    USD$ control the world serve as the world currency. The Americans benificial and make other country's citizen suffer from it, especially China !
    Shit, that is why I am still struggling in poverty.

    March 24, 2011 at 7:47 am |
  8. steve

    if you look at the whole picture ...to print a note and then lend it with interest charged on it. is that not corruption as that note that was printed is just a credit note with which you owe and pay interest on ...in order to pay that interest another note has to be printed....correct me if im wrong! the who system is about to fall down...the people have had enough, nobody is dealing with the real problem of damage to the plannnet that we live on. some pretend that they are but only to pay the interest on bank notes they have borrowed and do so to pay the interest on them! ITS QUITE SIMPLE IF YA STOP ! FEED PEOPLE DONT RAPE THEM... how many families have been destroyed by the fat cat banking system i ask fellow pawns?

    June 8, 2011 at 3:19 am |
  9. steve

    GREED GOT YA ALL !

    June 8, 2011 at 3:21 am |
  10. icon download

    I join. So happens. We can communicate on tihs theme. Here or in PM.

    hpixel

    September 23, 2012 at 11:21 pm |

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