British finance minister George Osborne has surprised his critics by increasing his budget surplus target for the end of the decade, taking a gamble that voters will accept more years of spending cuts. David Pollard reports.
It's a high-risk strategy. Will voters swallow years of more painful cuts? The economy's improved - and a renewed sense of threat means there's a case for spending more on security. Some thought the finance minister might ease back from a pledge to balance the budget. In the event, he didn't. SOUNDBITE (English) UK FINANCE MINISTER, GEORGE OSBORNE, SAYING: "We have committed to running a surplus. Today, I can confirm that the four-year public spending plans that I set out are forecast to deliver that surplus, so we don't borrow forever and are ready for whatever storms lie ahead." But the cuts - they're still coming too. SOUNDBITE (English) UK FINANCE MINISTER, GEORGE OSBORNE, SAYING: "I can tell the House (of Commons) that the 12 billion pounds of welfare savings we committed to at the election, will be delivered in full." Better growth means better UK finances, Osborne said. Even if, this year, he revised up the budget deficit slightly to 3.9 per cent. UK debt is still too high, he admitted: it's currently over 82 per cent of GDP. But with today's low interest rates, perhaps he's missing a trick, says Mint Partners Capital Markets Strategist Bill Blain. SOUNDBITE (English) BILL BLAIN, CAPITAL MARKETS STRATEGIST, MINT PARTNERS, SAYING: "This would be a perfect time for the state to effectively refinance itself at a much lower rate, or to go about the business of spending more money because money is so cheap." Before his speech, IMF figures put UK austerity as the most aggressive of any rich nation. But Osborne did back down on plans to cut state support for low-income workers - so-called tax credits. So perhaps not quite so aggressive after all.