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Five years into austerity, Britain prepares for more cuts
November 23, 2015 / 7:27 AM / 2 years ago

Five years into austerity, Britain prepares for more cuts

LONDON (Reuters) - After laying off nearly half its staff over the last five years, scaling back street cleaning and relying on volunteers to work at some of its libraries, the London borough of Lewisham is getting ready for what could be much more painful spending cuts.

Britain's Chancellor George Osborne speaks at the Bank of England's Open Forum 2015 conference on financial regulation, in London, Britain November 11, 2015. REUTERS/Suzanne Plunkett

Officials in Lewisham’s town hall, like those across the country, know they will have to shoulder much of Chancellor George Osborne’s renewed push to fix Britain’s budget.

Osborne is due to announce on Wednesday the details of a new spending squeeze which, according to International Monetary Fund data, ranks as the most aggressive austerity plan among the world’s rich economies between now and 2020.

It is also a gamble by Osborne, a leading contender to be the next prime minister, that voters can stomach more cuts.

He rejects accusations that his insistence on a budget surplus by the end of the decade is a choice, saying Britain needs fiscal strength to fight off future shocks to the economy.

As in the first five years of his austerity push -- which Osborne originally hoped would wipe out the budget deficit -- he plans to spare Britain’s health service, schools and foreign aid budget from his new cuts and will increase defence spending.

That means that cuts for unprotected areas of government, such as local councils, will be all the deeper.

Kevin Bonavia, a councillor who oversees Lewisham’s budget, said the borough had just agreed to merge computing teams with another one on the other side of London as it seeks to make more savings in its back-office operations and protect services.

But voters are likely to notice the cuts more in the years ahead than they have done so far. Rubbish bins may no longer be emptied weekly. Delivery of cooked meals could be replaced with help for people in need to do their own online shopping.

Lewisham will also have to find savings in the way it provides social care for the elderly and children, which accounts for the lion’s share of its spending.

“We are always trying to rationalise. But we have to do it at pace now, and when you do it at pace, you can make mistakes,” Bonavia, a member of the opposition Labour Party, said.

It’s not just Labour politicians who are worried about the latest spending squeeze.

The Conservative leader of a council in Oxfordshire recently wrote a blunt letter to Prime Minister David Cameron to spell out the challenge of funding care for the elderly and children after Cameron had complained about cuts to front-line services in the area, where he has a family home.

POLICE CUTS TOO

Britain’s police departments and the justice system, which runs courts, are also likely to bear the brunt of further cuts.

Ben Priestley, an official with public sector workers’ union Unison, said the number of police community support officers (PCSOs) -- who typically work most closely with local people but cannot make arrests -- had been cut by 27 percent since 2010 and some regional forces might have to lay them all off.

“The penny will gradually drop for the public,” Priestly said. “We might only see police officers when they speed by at 60 miles per hour with their blue lights flashing.”

Osborne acknowledges that his spending cuts will be painful. But he also says that Britain is learning to do more with less.

He points to statistics which show crime has fallen by more than a quarter since 2010, despite a 23 percent cut in the interior ministry’s budget since then, and surveys which show stable or rising satisfaction with local services.

As well as the departmental spending cuts that he is due to announce on Wednesday, Osborne has to tweak his plan for big savings in Britain’s welfare budget after an original proposal to scale back tax credits for lower-earning households was rejected in a rare rebellion by the upper house of parliament.

WILL VOTERS REBEL?

Some economists say the scale of the austerity plan is too ambitious to achieve in its entirety.

“We are pretty confident that the government manages to get the deficit down but it will be at a somewhat slower pace than the government plans,” said Kathrin Muehlbronner, senior vice-president of sovereign risk at ratings agency Moody‘s.

A bigger risk for Osborne is that voters start to feel the spending cuts more acutely and reject his case for them.

Katharine Peacock, managing director of polling firm ComRes, said Cameron and Osborne won the 2010 election because voters trusted them to fix an economic crisis with austerity.

“It’s more complex now,” Peacock said. “Do the public understand when George Osborne is saying on one hand, there are green shoots in the economy and things are improving - but we still have to cut? It’s more challenging to argue that now.”

Editing by Ruth Pitchford

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