UK Budget, Feels “Like an Amputation”
The UK took a chainsaw to its budget to the tune of roughly $120 billion. Unlike the US, the nation feels obliged to implement a few austerity measures that may lend some credibility to its AAA credit rating despite its record budget deficit. The cuts include raising the retirement age, reducing welfare benefits, and making plans to let go of nearly 500,000 government workers.
Independent analysts say the cuts are a massive gamble since public spending now accounts for almost half the British economy.
Martin Wolf, chief economics commentator for the Financial Times, thinks:
“A retrenchment on this scale, this quickly looks excessive, is likely to have a very negative effect on growth. And that will mean that the actual fiscal deficit won’t improve as much as they think.
If the economy actually contracts, the deficit could worsen. The government hopes the private sector will come to rescue and create hundreds of thousands of new jobs. Many other countries with big deficits — like the U.S. — will be watching Britain to see what happens next.”