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Global General

UK, EU to see massive spending cuts

By Fu Jing, Zhang Haizhou and Zhang Chunyan (China Daily)
Updated: 2010-10-21 08:00
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BRUSSELS / LONDON - The European Union (EU) and the United Kingdom (UK) approved tightened fiscal spending targets for 2011 which are expected to help lower the level of public debt while at the same time boosting economic growth.

The British government is braced for an uproar but British Finance Minister George Osborne said he had no choice given the need to cut a record budget deficit of 11 percent of the GDP - the highest in the G7 - to around 2 percent in 5 years, a fiscal tightening of some 113 billion pounds ($178 billion), a quarter of which will come from tax increases.

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Almost every government department - except health and international development - will be hit with budget cuts by up to 40 percent by 2015.

It is believed that the budgets of the Home Office and Justice Department will similarly be hit hard.

The EU's Budgets Committee has proposed an overall budget of 130.14 billion euros ($179 billion) in payments and 142.65 billion euros ($195.9 billion) in commitments, but the European Council is seeking to cut these figures to 126.53 billion euros ($173.8 billion) and 141.78 billion euros ($194.5 billion).

The members of European Parliament, however, are calling for more investment in research, innovation, education, energy and support for Palestine, while keeping a restrictive overall spending level.

They also wish to open talks on the current long-term budget framework and new ways of funding the budget. This year is the first in which the parliament has a full say on the whole EU budget, including farm spending, under the new Lisbon Treaty rules.

Given the current pressures on member states' national budgets, the Budgets Committee refrained from seeking any major increases in the overall level of the EU budget, compared with the European Commission's initial proposal.

Meanwhile, the European Parliament on Wednesday adopted changes to EU financial regulations, the staff rules and the 2010 budget needed for the European External Action Service, which is expected to recruit 7,000 staff members from now on.

The members of the European Parliament have managed to increase the parliament's overview of the service and to ensure that recruitment will respect geographical and gender balances.

Spending cuts in Europe have already worried the United States to some degree. Recently, US Secretary of State Hillary Clinton warned that reductions in defense spending by European governments could endanger the NATO military alliance.

To this end, Clinton urged the 28 NATO allies to build on their international success - and continue to pay dues for their organization to ensure its existence in the future.

UK spending cut breakdown

Almost the entire 8 billion pound ($12.6 billion) social housing budget, scores of road-building schemes and child benefits for those over 16 will also be scrapped. Some prisons will also be shuttered when the Ministry of Justice loses a third of its 9 billion pound ($14.2 billion) budget and axes more than 14,000 staff members.

Local reports have also said that nearly half-a-million public sector jobs will be axed by 2014.

Public sector workers will also have a two-year pay freeze, and be told that they face increased pension contributions from next year.

These budgets also involve massive cuts in university funding, in addition to wholesale reforms in public housing and public welfare.

In all, including cuts announced in the emergency budget, the welfare bill will be reduced by about 25 billion pounds ($39 billion) over the course of the next four years.

The UK Ministry of Defense's civilian staff will be reduced by 25,000, Cameron said, while the army will lose 7,000 troops and the Royal Air Force and Navy will face reductions of 5,000 personnel each.

The size of the spending cuts has spurred protests throughout London.

On Tuesday, thousands of teachers, council staff, firefighters, health workers and other public sector employees rallied against the cuts, as the London-based newspaper Metro reported.

Emotions, indeed, ran high.

"The coalition (government) is taking a chainsaw to our public services and we are under attack," said Unison general-secretary Dave Prentis at the Westminster Central Hall.

Fu Jing reported from Brussels, and Zhang Haizhou and Zhang Chunyan reported from London.

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