Britain's economic recovery is likely to be "choppy" but the coalition government will pursue its course of deep cuts in public spending, finance minister George Osborne vowed Tuesday. Slashing the record 154.7-billion-pound (188-billion-euro, 242-billion-dollar) deficit the government inherited from the previous Labour administration was the only "fair" action to take, Osborne argued in a speech to business analysts.
-- Inflation rate slows in July
The Chancellor of the Exchequer's speech was aimed at preparing the ground for a comprehensive spending review in October, when the Conservative-Liberal Democrat coalition is expected to identify sweeping cuts in public spending. Osborne attacked "deficit deniers" who accused the government of taking a "gamble" with its approach. "There are some political opponents who claim that in setting out our decisive plans to deal with the deficit we have a taken a gamble with Britain's economy," he told the analysts at an economic conference in London.
"In fact the reverse is true. The gamble would have been not to act, to put Britain's reputation at risk, and to leave the stability of the economy to the vagaries of the bond market, assuming investors around the world would continue to tolerate the largest budget deficit in the G20." Osborne said that while there were some encouraging signs of economic growth in Britain, caution was still the order of the day.
Inflation was "proving more persistent than expected", he said, and he agreed with the recent assessment from Bank of England Governor Mervyn King that Britain was likely to face a "choppy recovery." Official data showed Tuesday that Britain's annual inflation rate eased in July to 3.1 percent. But it remains above the BoE's target of 2.0 percent.
Osborne added: "To expect a smoother ride after the biggest economic crisis of our lifetimes, and with the debt problems this government has inherited, would be asking too much." He said critics of the coalition's action, such as members of Gordon Brown's previous Labour government, had failed to understand that injecting money into the financial markets had created new risks.
"Just because government bailouts helped to calm the markets for now does not mean that the risks have gone away - they have simply been transferred from banks to governments. "Economic stability now depends on a credible plan to restore the public finances to a sustainable path," he added.
In an interview ahead of the speech, Osborne argued that cutting public spending was fundamentally "fair" because it was not right to pass on a huge deficit to future generations. "Not living beyond your means is fundamentally progressive and fair," he told BBC radio. "I want, fundamentally, a child born at the end of this period of government to have better life chances than a child born at the beginning of this government.
"I also want to make sure that child is not burdened with debts that this generation were not prepared to pay off." The government has said that the only ministries to be spared cuts will be health and international development. Unions have warned workers at the justice ministry to brace for the loss of up to 15,000 of the ministry's 80,000 staff as its budget is slashed by up to 25 percent, according to a leaked letter.
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