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Britain unveils austerity budget
Britain’s new government today unveiled an austerity budget that calls for £17-billion in cuts and a freeze on public sector pay for two years. One of the key measures is a new bank levy that will begin next year and will affect not only domestic banks but also the British operations of foreign financial institutions. Chancellor of the Exchequer George Osborne, in unveiling the emergency budget, said France and Germany have similar plans, and he expects the new tax to bring in £2-billion a year.
Mr. Osborne said the government aims to slash government borrowing to 1.1 per cent of gross domestic product by 2015-2016, and even Queen Elizabeth II has agreed to a freeze on her financial support from the government. By 2014-2015, Mr. Osborne said, the government will cut spending by £30-billion. Among other measures:
- A cut in the corporate tax rate to 24 per cent over four years.
- Cuts to welfare aimed at saving £11-billion by 2014-2015.
- A freeze on the country’s child benefit for three years.
- A medical check for disability benefits.
Three agree to controversial bank tax
Germany and France joined Britain today in proposing new levies on financial institutions. Details are scant at this point, but the draft of a joint statement from the three countries, according to Bloomberg News, says France will unveil its proposal soon while Germany will unveil draft legislation in the summer. “All three levies will aim to ensure that banks make a fair contribution to reflect the risks they pose to the financial system and wider economy, and to encourage banks to adjust their balance sheets to reduce this risk,” the statement said.
Mr. Osborne told the House of Commons that the crisis began in the banking sector, and that their failures put a hefty burden on society. The banks, he said, must “make a more appropriate contribution, which reflects the many risks they generate.” Read the story
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Japan pledges to cut deficit
‘Austerity’ has become a key word after the massive government spending to fight the recession. Japan’s Prime Minister Naoto Kan, in his first speech to the Diet, pledged today to get a handle on the country’s deficit, estimated at almost 10 per cent of GDP, and overall debt, pegged at 227 per cent of GDP. There were few details, but he aims to cut the deficit in half by 2015-2016, with a surplus by 2020-2021.
