It seems Britain has finally realised that printing and borrowing money does not create wealth.
(Reuters) - Britain will cut half a million jobs, lift the retirement age and slash welfare as part of an unprecedented cost-cutting drive announced on Wednesday which will test the strength of the economy and the government.
The long-awaited spending review confirmed 80 billion pounds of cuts, sent unions into a fury and turned up the heat on the Liberal Democrats, the junior coalition partners who campaigned against such sharp fiscal tightening before the May election.
The jury remains out on whether the economy -- just recovering from the worst recession since World War Two -- can survive the squeeze which will cut growth by around half a percent each year. Analysts expect the Bank of England to keep monetary policy super-loose for the foreseeable future.
Nor is it clear whether the cuts -- aimed at bringing down a record budget deficit of 11 percent of GDP -- can actually be achieved. More of the burden has been shifted to the notoriously hard-to-cut welfare bill -- an extra 7 billion pounds on top of the 11 billion pounds cuts already announced.
Conservative finance minister George Osborne said that was the best way and would mean that government departments outside protected areas like health and international aid would only see their budgets shrink by, on average, 19 percent, not the 25 percent announced in his budget.
"Tackling this budget deficit is unavoidable. The decisions about how we do it are not. There are choices. And today we make them," the 39-year-old who took office in May told parliament.
He said the state pension age for men and women will rise to 66 by 2020 and that 490,000 public sector jobs were likely to disappear over the next four years......read on
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