UK Treasury chief says austerity measures will economy

By David Stringer, AP
Monday, October 4, 2010

UK cuts child benefit payments in austerity drive

LONDON — Britain will cap payments to jobless families and scrap child benefits for high earners in a sweeping overhaul of the country’s welfare system, Treasury chief George Osborne said Monday.

Osborne, who is seeking to save about 86 billion pounds ($135 billion) in government spending over the next five years, said the cost of welfare payments was out of control — and rewarding some people for staying out of work.

At an annual rally of his Conservative Party, Osborne said Britain’s coalition government would introduce a new welfare cap to make sure families in which both parents are unemployed do not receive more in benefits than an average family earn in wages.

Osborne also announced parents who earn more than 44,000 pounds ($70,000) per year will lose child benefit payments from 2013. Currently, all families are paid 20 pounds ($32) a week for their eldest child and about 13 pounds ($20) for other children. The benefits continue until the children are 19, if they stay in full-time education.

There would be welfare payments “to families who need it — but not more money than families who go out to work,” Osborne told activists at the rally in Birmingham, central England.

“That is what the British people mean by fair — and we will be the first Government in history to bring it about,” he said.

Since the coalition took office in May, Osborne has already announced a multibillion pound package of spending reductions and tax hikes, including a two-year pay freeze for most public sector workers, a new levy on banks and a rise in a tax on goods and services.

He will set out detailed plans for spending cuts over the next five years in an address to Parliament on Oct. 20, aiming to all but clear Britain’s deficit by 2015.

Osborne said the government’s austerity measures would bring prosperity in the future. He dismissed plans from the main opposition Labour Party to cut the deficit at a slower rate, saying that would only prolong the period of budget restraint.

“The hard economic choices we make are but a means to an end, and that end is prosperity for all,” he said.

On Sunday, about 7,000 labor union members — including teachers and health service workers — staged a march outside the Conservative convention, to protest at planned spending cuts. Labor unions plan further protests to coincide with Osborne’s announcement to Parliament.

“Everyone can agree that we need a fairer economy built on higher, better balanced growth. But the spending and benefit cuts will do the opposite — pushing many people into poverty, hitting middle income Britain hard and threatening growth,” said Brendan Barber, general secretary of the Trades Union Congress.

Yvette Cooper, a Labour lawmaker and the party’s spokeswoman on work and pensions, said the government should increase its levy on banks, rather than cut child benefit payments.

Osborne said the Conservative-led government would prioritize spending on education and improvements to Britain’s infrastructure — including a new high-speed railway network.

“Britain has no divine right to be one of the richest countries in the world. As economic power is shifting to the east, there is nothing automatic about our prosperity,” he told the rally. “If our skill base continues to decline, there will be no growth. If our infrastructure remains poor, there will be no growth.”

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