A leading economic research institute…

A leading economic research institute warned Thursday that “colossal” cuts in public spending could change the British state “beyond recognition,” a day after the government outlined plans for eliminating the deficit within five years.

The unusually strong language from the London-based Institute for Fiscal Studies reflects just how much austerity-related pain still looms for Britain, despite years of deep cuts to the nation’s health, welfare and defense programs. It also shows how the damage wrought by a global recession still lingers, even for countries that are supposedly on the path to recovery.

In a world of economic laggards, Britain has been a relative bright spot, with healthy gross domestic product growth, falling unemployment and, recently, modest wage increases.

Prime Minister David Cameron and his ruling Conservative Party have been eager to claim credit for the rebound, saying that years of belt-tightening have paid off for Britain even as the rest of Europe continues to stumble.

But with five months to go before Cameron faces voters in a general election, his government was forced to acknowledge Wednesday that its plans for tackling the deficit had fallen far short of the target because of lower-than-expected tax revenue.

Despite a 2010 pledge to eliminate the deficit by 2015, figures released Wednesday show that it is still in excess of $140 billion. In a new forecast, the government indicated that it now intends to zero out the deficit by 2019.

“How do we get to this sunlit upland in which we have a budget surplus? Spending cuts on a colossal scale is how, taking total government spending to its lowest level as a proportion of national income since before” World War II, said Paul Johnson, director of the Institute for Fiscal Studies, in remarks prepared for delivery Thursday.

Johnson said that funding for local government, defense and transportation could be hit particularly hard and that the country was “considerably less than half way” through the cuts required to get back to fiscal balance. “If we move in anything like this direction, whilst continuing to protect health and pensions, the role and shape of the state will have changed beyond recognition,” he said.

That prospect prompted BBC political correspondent Norman Smith on Thursday morning to call the cuts “utterly terrifying,” comparing the outlook for Britain to the conditions delineated in George Orwell’s Depression-era chronicle of misery, “The Road to Wigan Pier.”

Britain’s top economic official, Chancellor of the Exchequer George Osborne, shot back in a testy BBC interview that such assertions were “nonsense.”

“I would have thought the BBC would have learned from the last four years that its totally hyperbolic coverage of spending cuts has not been matched by what has actually happened,” Osborne said.

Source: The Washington Post / Dec. 4, 2014


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