LONDON – Britain’s Treasury chief offered a dampened view of the economy on Monday, warning that substantial savings must be gleaned from welfare cuts if the country is to eliminate the deficit.
The British economy has been enjoying a stronger recovery than most European countries, but George Osborne noted there are still big underlying problems.
He said 2014 is to be the “year of hard truths” and that the country faces a choice.
“Do we say: ‘the worst is over; back we go to our bad habits of borrowing and spending and living beyond our means — and let the next generation pay the bill’?” he said.
Osborne told workers at a Birmingham company that supplies auto components that billions of pounds (dollars) in welfare cuts will be needed to reduce the deficit, which was swollen by the economic crisis.
The government deficit dropped to 5.2 per cent of gross domestic product in the 2012-2013 fiscal year, from 7.6 per cent in the previous one.
His sober message comes in stark contrast to the recent news on Britain’s economy. Though the recovery from the 2008-2009 recession hasn’t been electrifying, Britain is doing better than most other major economies around the world. Its quarterly growth rate of 0.8 per cent in the third quarter is better than Germany’s 0.3 per cent and the overall European Union’s 0.2 per cent.
At the same time, unemployment has dropped to 7.4 per cent, its lowest rate in 4 years, and inflation has dropped to 2.1 per cent, just slightly ahead of the Bank of England’s 2 per cent target.