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Economists: Britain's austerity plan to hit poor

Economists: Britain's austerity plan to hit poor
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Thursday, October 21, 2010 - 6:28pm

LONDON – Britain's poor and powerful clashed Thursday over who will lose out most under austerity measures that will slash benefits, jobs and government services to reduce the country's crippling debts.

Treasury chief George Osborne has announced 81 billion pounds ($128 billion) in spending cuts through 2015 that will cost as many as half a million public sector jobs and trim welfare payments to families and the disabled.

Government departments will, on average, have their budgets cut by about 19 percent, forcing them to lay off staff and limit the scope of their work.

It means Britain will have fewer police, pay less to those without jobs and send fewer criminals to prison. Embassies will be shuttered, as will courts and military bases. Britons will lose billions in benefit payments, retire later, and pay more for day-to-day items like train tickets.

Even the Royal Mint faces cutbacks: It will use cheaper metals in British coins in an attempt to make savings.

Osborne had said Wednesday in an address to Parliament that "those with the broadest shoulders should bear the greatest burden," saying Britain's highest earners would be worst affected by the cuts.

But economists and the public disagree, believing the measures will cause most hardship for lower-paid government workers and Britons reliant on welfare checks.

The Institute for Fiscal Studies, an economic think tank, said that — aside from the richest 2 percent of people — most of the pain would be inflicted on working families, the sick and the poor.

"You're really picking on the weakest people in society and it's completely unfair how you're applying these budget cuts," Margaret Lynch, 52, told Prime Minister David Cameron and his deputy, Liberal Democrat leader Nick Clegg, as they defended the plan at a public meeting in Nottingham, in central England.

Lynch, who has multiple sclerosis and uses a wheelchair, said outside the event that her government benefits were being cut by about half.

Hundreds of Britons demonstrated against the cuts outside Downing Street, the prime minister's official residence in London, late Wednesday. Police said three people were arrested for breaking into the government's business ministry.

Some legislators worry that women will lose out more than men, as about 65 percent of the public sector work force is female. Pension plans for women are changing more quickly than those of men, standardizing the retirement age at 66 for both genders by 2020.

"Women are more likely to work in the public sector, and more likely to use public sector services," said Stella Creasy, an opposition Labour Party lawmaker who represents the London district of Walthamstow in Parliament.

The Institute for Fiscal Studies said Osborne's spending cuts are the deepest since World War II, and public services face the harshest budget limits since the mid-1970s.

Labour said the Conservative-led coalition government is exploiting the economic gloom to reduce the size of government, a long-held Conservative ideal. "It is a blueprint for a smaller, meaner and nastier society," Labour lawmaker Angela Eagle told the BBC. The opposition says cutting public sector jobs could hamper Britain's economic growth, favoring instead a slower pace of cuts.

Osborne said Wednesday the cuts were an unavoidable remedy for the debts Britain piled up during the global financial crisis. The Labour government spent billions to bail out two major banks — the Royal Bank of Scotland and Lloyds Banking Group — and took full ownership of mortgage lender Northern Rock.

His stance was backed by U.S. media tycoon Rupert Murdoch, who used a speech Thursday in London to praise the austerity measures.

"Strong medicine is bitter and difficult to swallow. But unless you stay the political course, you will be neither robust nor popular," Murdoch told the Center of Policy Studies, a think-tank.

The Labour Party was in office for 13 years, until May of this year, and was responsible for the initial response as the financial crisis began.

The Treasury confirmed Thursday there will be a permanent levy on the balance sheets of banks — expected to raise about 2.5 billion pounds ($4 billion) a year by 2014 — and there will be further discussion of measures to curb bankers' bonuses.

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