U.K. Government Unveils Tough Austerity Plan

The British government unveiled the largest planned cuts in public spending since World War II Wednesday. Britain's Treasury chief says he wants to cut more than $130 billion from the budget through 2015 in order to clear Britain's mounting debt.

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RENEE MONTAGNE, host:

It's Morning Edition from NPR News. I'm Renee Montagne.

STEVE INSKEEP, host:

And I'm Steve Inskeep. Good morning.

We're going to talk, this morning, about the way two of the world's larger economies are handling an enormous problem: huge government budget deficits.

MONTAGNE: In a moment, we'll get an update from David Wessel on the budget problems that the next Congress will face.

We begin in Britain, where the government is unveiling a huge austerity program.

INSKEEP: Prime Minister David Cameron's government is planning to cut public spending by $130 billion over the next four years, and given that Britain is a much smaller country than the U.S., that is a lot of money. We're going to talk about this with NPR's Philip Reeves, who's in London.

Hi, Phil.

PHILIP REEVES: Hi.

INSKEEP: What are they going to do?

REEVES: Well, we're getting some sense of what they're doing from the finance minister, George Osborne, who's been addressing Parliament this morning. He said that this is a day when Britain steps back from the brink, and outlined a four year plan which he said was unavoidable, as Britain has the largest structural deficit in Europe. Just to give a sense of that, he said that this was sort of a debt supertanker that he was trying to turn around. Debt interest payments, are running, in this country, at $192 million a day. So, he said, he's going to be reforming the welfare system, he says Britain can't afford that; and squeezing every single penny, he said, out of government administration central government departments which are having their admin costs cut by a third.

INSKEEP: And when you're talking about cutting admin costs and cutting spending, you're talking about cutting jobs, aren't you?

REEVES: Yes you are. And of course, there will be other measures, too. But just in that area, Osborne said that the best estimate was 490,000 civil servant jobs that will go over the next four years. Some of these, he said, will go through natural wastage, but redundancies are unavoidable, he said, when, quotes, "the country has run out of money." Incidentally, the Queen is not going to lose her job, but the government's also cutting her money. She's agreed, Osborne said, to a 14 percent cut in the total Royal household spending, which will be imposed in the years 2012 to 13.

INSKEEP: Now, I wanted to listen to this debate, Phil, for a number of reasons. One of them being, that although we don't yet have such a debate in the United States, we do have enormous budget deficits in the United States and we're going to be talking about that a little bit more in a moment but give us a sense of the debate there in Britain. How are people beginning to react to these enormous cuts?

REEVES: Well, you know, it's been, sort of, the only subject of discussion, really, in the last few days, in the media. And people here, kind of like tough talk on these type of issues. I think there's a puritanical streak in this country, which comes out on occasions like this. Where we will really find out what people feel about this, is when the impact of these cuts are felt on the streets. And the other factor that's everywhere in this debate, is a public sense of anger and resentment about the banks. People haven't forgotten that bailing the banks out, to the tune of billions of dollars, caused, in large part, this crisis, in the first place.

INSKEEP: Any bit of surprise, that a conservative-led government in Britain, conservatives would be talking about tax increases, along with all these spending cuts?

REEVES: Yeah, no surprise there. The government has said that all along.

INSKEEP: Well now, there's also defense cuts here, right? Which is a big deal for the United States, because Britain is the largest U.S. ally overseas, especially in Afghanistan.

REEVES: Yes, 42,000 defense jobs are going more than half of those are civilians, but 7,000 soldiers and 5,000 personnel from the navy and the air force, each. And Britain's also going to be delaying its upgrade of the submarine-based nuclear weapons system, that's Trident. And it's putting its Harrier Jump Jet fleet into retirement. It's going to cut, dramatically, the number of tanks and heavy artillery they'll be cut by about 40 percent. But, importantly, Cameron, the prime minister, who spoke of this yesterday, says there'll be no cut in support for British troops in Afghanistan.

INSKEEP: OK, Phil, thanks very much.

REEVES: You're welcome.

INSKEEP: That's NPR's Philip Reeves, bringing us the latest from London, where the British government has announced drastic spending cuts.

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