LONDON — Britain’s new coalition government on Tuesday unveiled the country’s most painful budget in a generation, outlining a program of deep spending cuts and tax hikes in line with the mood of public austerity sweeping across Europe.
George Osborne, chancellor of the exchequer, said drastic measures affecting everyone were unavoidable to mollify jittery investors and tackle Britain’s biggest national deficit since World War II. The emergency budget calls for increases in sales and capital gains taxes and reductions in welfare benefits to help erase the government deficit within six years.
Osborne pledged that the austerity plan would protect society’s most vulnerable, despite immediate criticism to the contrary, and rejected arguments that such a harsh package of cuts would strangle economic growth and precipitate a double-dip recession.
“Unless we deal with our debts, there will be no growth,” Osborne told lawmakers in Parliament. “A credible plan to cut our budget deficit goes hand in hand with a steady and sustained economic recovery with low inflation and falling unemployment.”
He added that the Tory-led coalition’s promise of tough action on the deficit had increased Britain’s “credibility in international markets.”
Britain is faced with a budget deficit equal to more than 10 percent of its gross domestic product and debts of more than $1 trillion.
Tuesday’s budget is the harshest since the early 1980s, when fellow Tory Margaret Thatcher was prime minister.
It includes a two-year salary freeze for most public-sector employees, a sped-up timetable for raising the retirement age to 66 and reductions in certain welfare benefits. Except for health care and foreign aid, all government departments will be expected to make deep cuts, although specific programs on the chopping block won’t be known until October.
To bring in more money, the government plans a modest rise in capital gains tax for high-wage earners and a levy on banks, many of which received massive infusions of taxpayer cash during the worldwide financial meltdown.
