George Osborne's £81bn in budget cuts is the harshest set of public spending cutbacks since the 1970s. Fiona Hanson/PA Wire
UK Spending Review

Chancellor defends 'fair' spending cuts as welfare is slashed

Britain wakes up to a new era of austerity – but will the £81bn cuts save the economy, or hamper any growth?

BRITAIN’S CHANCELLOR of the Exchequer, George Osborne, has insisted his £81bn package of public spending cuts announced yesterday are “fair” to all sections of society – after the opposition Labour party said it hit the poorest parts of society the hardest.

Osborne told the BBC that the cuts in public spending would lead to the creation of many more private sector jobs over the four-year life of the austerity programme, and that Britain faced “the path to economic ruin” if the excessive spending wasn’t addressed.

The programme was slammed by the Labour party, however, which said that the cuts were a “reckless gamble” with the future of the country, which has not had to face public cuts of such scale since the 1970s, when the UK was bailed out by the IMF.

The cuts will see the state retirement aged raised to 66, while social welfare benefits will be capped for each household, and 490,000 public sector jobs would be lost. The cuts aim to balance the public books by 2015.

The Daily Mail reports that the measures will take their hardest hit on homes earning £48,700 a year, though the Treasury says the measures will result in the better-off parts of society losing £1,500 a year in income, while poorer people would be hit by £250 a year.

The Guardian said the budgetary axe had fallen on the poor, while the Daily Telegraph reported that the cuts would hit middle-class families hardest – by £10,000 a year.

Forbes blogger Stephen Pope believes that addressing the UK’s “dreadful debt” will help to save the economy, with the moves to address the need to borrow each year helping to reduce the UK’s mounting annual interest bill which this year would have reached £43bn otherwise.

The world’s markets reacted positively to the programme, however, with the price of borrowing for the UK over ten years falling moderately yesterday, dipping below the 3% mark it had breached on Tuesday, and continuing to fall this morning.

The FTSE 100 index also rose yesterday and continues to gain ground this morning.

Announcing the cuts – which will see Northern Ireland’s budget hit by £4bn – Osborne even had time to get in a sly dig at Irish finance minister Brian Lenihan, ridiculing his premature calling that Ireland had “turned a corner”.