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International News Title: Osborne Cuts to Eliminate 500,000 Jobs in U.K., Tax Banks, Curb Debt Costs Oct. 20 (Bloomberg) -- Chancellor of the Exchequer George Osborne detailed the deepest budget cuts ever in Britain, eliminating almost 500,000 public-sector jobs and imposing a levy on banks to extract the “maximum sustainable” revenue. “Today’s the day when Britain steps back from the brink,” Osborne told lawmakers in the House of Commons in London today as he outlined plans to virtually eliminate a 156 billion-pound ($245 billion) budget deficit with average cuts in government departments of 19 percent. It’s “a day of rebuilding when we set out a four-year plan to put our public services and welfare state on a sustainable footing,” he said. At stake is Britain’s top-grade credit rating, a fragile recovery from its longest recession on record and the future shape of the postwar welfare state. Investors said they’re concerned Osborne, 39, the youngest chancellor since 1886, won’t be able to hold the line as ministers plead for extra money to fund welfare benefits or avoid reductions in police numbers. The pound rose 0.3 percent to $1.5749 at 2:18 p.m. in London. The plans would reduce public spending by 81 billion pounds after inflation, narrowing a deficit that the government forecasts at 10.1 percent of gross domestic product this year to 2.1 percent of GDP in the 2014-15 fiscal year. Debt interest costs would fall by more than 5 billion pounds by 2015. Total spending would fall by 0.7 percent a year after inflation, according to a June outline. Under Margaret Thatcher, 85, who was known as the Iron Lady during her 11 years as premier that ended in 1990, spending rose by an annual 1.2 percent. Bank Levy Legislation to impose a permanent levy on banks will be published tomorrow, Osborne said. “We neither want to let banks off making their fair contribution, nor do we want to drive them abroad,” he said. “Our aim will be to extract the maximum sustainable tax revenues from financial services. We will assess what those maximum revenues could be -- not just in one year, but over a period of years.” In a June 22 budget blueprint, Osborne said he intended to raise more than 2 billion pounds a year through a tax on bank balance sheets. Osborne said he agreed with the Office for Budget Responsibility estimate that 490,000 public-sector workers will lose their jobs over four years. He said much of that will be achievable by not filling vacant posts. Welfare Cuts Cuts in welfare spending will total 7 billion pounds a year through a cap in benefits to unemployed families at the average working family’s income and a curb on payments for housing subsidies and tax credits. The opposition Labour Party responded that the welfare cuts were driven by ideology more than necessity. “We have seen people cheering the deepest cuts to public spending in living memory,” said Alan Johnson, Labour’s Treasury spokesman. “This is what they came into politics for. Today is the day that abstract figures and spreadsheets turn into people’s jobs and people’s futures.” Before today, the government plans to trim the budget had won over investors. Gilts have returned 7 percent since David Cameron replaced Labour Prime Minister Gordon Brown in May, more than the 4 percent gain by German bunds and the 5.8 percent increase in U.S. Treasuries, show indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. The pound has gained more than 5 percent against the dollar. Spending Reductions Osborne said a 6 billion-pound cut in central government spending was double what he estimated in June. Funds for local governments will fall 7.1 percent by 2015 and money for the royal family will be frozen next year. The Foreign Office will see its funding cut by 24 percent and the Ministry of Justice will be cut by an average of 6 percent a year. “Next month, each government department will publish a business plan setting out its reform plans for the next four years -- so their priorities are clear and the public can hold them to account,” Osborne said. Divisions on the implementation of cuts have already emerged, with Chris Huhne, the Liberal Democrat Energy Secretary, saying on Oct. 8 that the government may need to change its plans if the economy fails to strengthen. Lawmakers from Cameron’s own Conservative Party have questioned the implementation of cuts in child-benefit payments to 1 million better-off families. Cameron pledged before the election to protect spending on the National Health Service, which provides free medical treatment for everyone resident in Britain, and to maintain spending on foreign aid. Those pledges, which were opposed by the Liberal Democrats before the election, have increased the pressure for cuts on other departments.
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