UK public sector, welfare faces budget axe

08:23, June 21, 2010      

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Britain's public sector workers and welfare recipients will shoulder part of the spending cuts to be outlined in the June 22 budget, Prime Minister David Cameron indicated in a newspaper interview released yesterday.

Cameron, the Conservative leader who heads up a newly-formed coalition with the smaller, centre-left Liberal Democrats, has pledged to tackle a budget deficit running close to 11 percent of national output to restore investor confidence. "There is no way of dealing with an 11 per cent budget deficit just by hitting either the rich or the welfare scrounger," Cameron said in extracts from the interview released in advance by The Times.

"There are three large items of spending that you can't ignore and those are public sector pay, public sector pensions and benefits."

Cameron's finance minister, George Osborne, has indicated he wants to split the fiscal tightening with 80 percent coming from spending cuts and 20 percent coming from tax hikes.

Changes to pay and pensions for Britain's six-million-strong public sector work force are likely to form a key part of the deficit reduction plan, alongside welfare spending restraint.

"If you restrain pay you protect jobs," Cameron said. "There is no animus against people because they work in the public sector. It is just a question of how do we best deal with this budget deficit in a way that is fair."

Other newspapers speculated on what Osborne could announce on Tuesday. The Financial Times said he would set out a plan to eliminate the structural deficit -- the part of the deficit that is not affected by the economic cycle -- by 2015.

"We cannot go on forever adding to the national debt," Cameron said. "So we have to show a path back to a situation where we are not adding to debt, that is key."

The Telegraph said Osborne was mulling a freeze on welfare benefits that could raise more than four billion pounds (US$5.93 billion).



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