UK, France turn to tough budget

08:49, June 22, 2010      

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Britain and France are ready to announce additional action to fight overspending, officials said Monday against a background of unease on financial markets over debt in the eurozone.

The biggest threat to Britain's economy is its huge budget deficit, and an emergency budget today will save the country from the fate of debt-stricken Greece, British Chancellor of the Exchequer George Osborne said Sunday.

Measures expected to be included in the budget include a bank levy and reform of welfare benefits and public sector pay. Other plans include payroll tax breaks for new businesses, a council tax freeze and a review of public sector pensions.

"You can see in Greece an example of a country that didn't face up to its problems, and that is the fate that I want to avoid," Osborne told the BBC in an interview.

The budget is expected to be the tightest in at least 30 years. One of the few sweeteners expected in the budget is a payroll tax holiday for the first 10 employees hired by new businesses outside Britain's southeast, government sources said.

The maximum a business can claim per employee will be 5,000 pounds ($7,400) a year for those earning less than 44,800 pounds ($66,653), in the three-year plan costing 900 million pounds ($1.34 billion) and meant to boost the economy in less prosperous parts of Britain.

A ComRes poll for The Independent on Sunday found support for Britain's three main political parties was largely unchanged since the May 6 general election, but it also showed divisions over some possible austerity measures.

Most of those polled last week agreed that child benefits should be withdrawn from wealthier people, 48 percent agreed that they would rather pay higher income taxes than see public services cut, and 49 percent disagreed that the government was exaggerating financial problems to justify public sector cuts.

Claude Gueant, general secretary of French President Nicolas Sarkozy, told the Financial Times newspaper that extra action might be announced by this fall to ensure that the public deficit is reduced to 3 percent of gross domestic product by the end of 2013, as promised to European Union authorities, from an expected level of 8 percent this year.

"There will be other announcements. We have to do more of course - a lot more," Gueant said.

Source: Global Times


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