Budget cuts may see another recession - UK regions

LONDON Thu Oct 7, 2010 2:51pm BST

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LONDON (Reuters) - The leaders of the United Kingdom's three devolved administrations on Thursday urged Chancellor George Osborne to delay planned spending cuts, saying the measures could put the economy back into recession.

Osborne is due to unveil reductions of around 25 percent across most state departments on October 20 to tackle a budget deficit of around 11 percent of gross domestic product.

The appeal from the first ministers, deputy first ministers and finance ministers of Scotland, Wales and Northern Ireland is the latest outcry against the scale of the cutbacks.

Trade unions have already warned they will stage coordinated strikes if Osborne goes ahead with the spending reductions.

"We all believe these cuts are too fast and too deep," the regional leaders said in a joint statement.

"We believe that promoting economic growth is the best way to restore the health of our public finances and this must be our overriding priority," the leaders said.

The politicians all lead administrations largely opposed to the Conservative-Liberal Democrat coalition in the London parliament.

They are dwarfed by the economic power and population of England, the largest of the four components of the United Kingdom.

The regional leaders said they feared Osborne's spending cuts could put at risk Britain's recovery from its worst recession in generations following the global financial crisis.

"We therefore urge that the spending cuts are scaled back and phased in over a longer time period," they said.

"Failure to do so runs the risk of doing lasting damage to the economy and the fabric of our public services."

The coalition government agreed the level of cuts in a June budget promising to almost eliminate the deficit over five years.

The markets have given a warm welcome to the plans and any suggestion the cuts could be delayed would unnerve investors in British government debt (gilts) and ratings agencies.

Coalition ministers have repeatedly said the deficit must be cut as planned and stressed there is no alternative if Britain is to avoid Greek-style economic chaos.

The three regional administrations have devolved responsibility for public services such as health and education, but are reliant on London for most of their funding and have high levels of state employment.

Around 10 million people live in Scotland, Wales and Northern Ireland, compared to 52 million in England. Together they contribute just 15 percent of the UK's economic output.

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