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06-23-2010, 07:15 PM
UK: UK budget cuts to hit economic growth

London, (IRNA): Chancellor of the Exchequer George Osborne delivered his first budget Tuesday aiming to balance the country’s structural deficit within five years but at a cost of reduced economic growth.

Osborne announced an accelerated reduction of Britain’s record deficit based on 77 per cent coming from public spending cuts and 23 per cent coming from taxes.

But the cost was lower predicted economic growth, down to only 1.2 per cent this year, rising to just 2.3 per cent next year and 2.8 per cent in 2012.

Responding for the opposition, acting Labour leader Harriet Harman warned that the emergency budget was “bad for growth that will be harder to cut the deficit.”

Osborne predicted that unemployment in Britain, currently at 7.9 per cent, will peak this year at 8.1 per cent before starting to fall back towards 6.1 per cent.

He announced a two-year pay freeze for public sector workers, although the 1.7 million lowest paid will get a flat £250 pay rise, together with an increased tax allowance.

But no sector would be immune from austerity measures, including welfare, where child benefit was to remain universal but frozen for the next three years, housing benefits to be cut and new assessments to be introduced for disability allowances.

The biggest outcry came when the chancellor announced that VAT tax on goods and services would increase from 17.5 per cent to 20 per cent in January.

Increasing VAT was “unavoidable” to pay for the previous government’s “irresponsibility,” he said. He also targeted banks, blamed largely for the economic crisis, saying it was appropriate for them to contribute by paying a levy starting next year.

"The burden is fairly shared," Osborne argued. But Harman said it was "a reckless Budget which pulls the rug out from under the economy."

Trades Union Congress general secretary Brendan Barber described it was an “economically dangerous and socially divisive” budget.

“The one thing we can now say is that we are very definitely not all in this together," he said.