Britain said yesterday it would cut half a million public sector jobs, raise the retirement age and slash the welfare state as part of the biggest spending cuts in a generation.
After months of bitter negotiations, British Chancellor of the Exchequer George Osborne, a Conservative, confirmed he would press ahead with almost all the spending cuts he had outlined in a June budget.
Capital spending, however, would be ￡2 billion (US$3.2 billion) higher than a year originally planned because of the difficulty of getting out of contractual obligations, he said.
“Tackling this budget deficit is unavoidable. The decisions about how we do it are not. There are choices. And today we make them. Investment in the future rather than the bills of past failure. That is our choice,” Osborne told parliament.
Economists are split between those who say the drastic action is needed and those who argue it will tip Britain back into recession. Almost all agree, however, that growth will slow and the Bank of England will have to keep monetary policy super-loose for the foreseeable future.
Sterling trimmed gains against the dollar and slipped versus the euro yesterday and some analysts linked the move to Osborne reiterating plans to impose a levy on banks.
Osborne said that the state pension age for men and women will increase to 66 by 2020: “Raising the state pension age is what many countries are now doing, and will by the end of the next parliament save over ￡5 billion (US$7.9 billion) in a year.”
He said he would also cut a further ￡7 billion off the welfare budget on top of the ￡11 billion of reductions he identified in June. Around 490,000 public sector jobs were likely to disappear over the next four years.
Unions have already decried the likely job losses. However, public opposition to the cuts in Britain has so far been muted compared with France, where unions are trying to force a retreat on pension reform with protests including blockades of fuel depots.
There have also been protests against the austerity budget that Spain’s parliament was to approve yesterday, while in Portugal unions have called a general strike for Nov. 24 as the minority government bargains for support in parliament for measures needed to shore up investor confidence.
The British government is braced for an uproar, but Osborne said he had no choice given the record budget deficit of 11 percent of GDP — the highest in the G7 — to around 2 percent in 5 years, a fiscal tightening of some ￡113 billion, a quarter of which will come from tax rises.
No previous British government has tried anything as -ambitious and the National Institute of Economic and Social Research think tank said yesterday it thought the government could only push through half the planned cuts.
The latest Reuters/Ipsos MORI political monitor on Tuesday showed 38 percent of people believe the center-right Conservatives have the best economic policies compared to a quarter who preferred the opposition Labour Party’s stance.
The Liberal Democrats, the junior coalition partners, have seen their support plummet in most polls as they have become party to policies they did not support before May’s election.
Much will depend on how the economy copes with the fiscal tightening. For now, the consensus is that Britain will achieve slow growth for a couple of years as the private sector picks up the baton from a deflated public sector.
The latest Reuters poll of economists’ forecasts is for GDP growth of 1.6 percent this year and 1.8 percent next year.
Polytronics Technology Corp (聚鼎科技) yesterday announced that it is buying Henkel AG’s thermal clad dielectric material (TCLAD) business division for US$26 million as the Taiwanese firm aims to improve its technology, product portfolio and revenue performance. Polytronics, headquartered in the Hsinchu Science Park (新竹科學園區), is a supplier of protection components and heat dissipation materials. The firm entered the metallic heat-dissipation substrate market in 2007 and developed a unique solventless production process. Its board of directors approved signing an agreement with Henkel to acquire the German chemical firm’s TCLAD division in the US. The purchase includes all assets and business interests, including equipment,
SIZE MATTERS: Medium-sized hotels that do not have the support of parent groups are more vulnerable and are forced to take action, a REPro Knight Frank researcher said About 50 hotels across Taiwan are seeking to exit the market as they succumb to the bleak business outlook amid international travel restrictions imposed to combat the COVID-19 pandemic. Yomi Hotel (優美飯店) on Minsheng E Road, Sec 1, in Taipei is seeking to transfer ownership with an asking price of NT$950 million (US$32.15 million) and a pledge for a lease contract that guarantees a 3 percent return. The budget hotel, with room rates that start from NT$1,400 per night, maintains normal operations, but has been struggling since March, when the government placed restrictions on inbound and outbound travel. Occupancy rates for hotels in
With the US dollar expected to weaken in the next 12 months due to near-zero interest rates, investors should consider purchasing US corporate bonds, Standard Chartered Bank Taiwan Ltd (渣打台灣銀行) said on Thursday. The bank said that the US Federal Reserve since last month has been buying bonds issued by US companies to curb default rates. The US dollar is forecast to be weaker against the pound, the euro and the yen, as well as the Canadian dollar, the Swedish krona and the Swiss franc, as the greenback lacks high investment returns after the Fed in March slashed the benchmark interest rate
‘SENSITIVE MARKETS’: The previously unannounced project would involve the company handing over control of data to a third party to sidestep privacy concerns Google has abandoned plans to offer a major new cloud service in China and other politically sensitive countries due in part to concerns over geopolitical tensions and the COVID-19 pandemic, two employees familiar with the matter said, revealing the challenges for US tech giants to secure business in those markets. In May, the search giant shut down the initiative, known as “Isolated Region” and which sought to address nations’ desires to control data within their borders, the employees said. The action was considered a “massive strategy shift,” said one of the employees, who added that Isolated Region had involved hundreds of employees