Newspaper article International New York Times

British Finance Minister Holds Fast to Austerity ; but with Eye on Elections, Osborne Offers Breaks to Businesses and Retirees

Newspaper article International New York Times

British Finance Minister Holds Fast to Austerity ; but with Eye on Elections, Osborne Offers Breaks to Businesses and Retirees

Article excerpt

The budget presented Wednesday by the chancellor of the Exchequer, George Osborne, included help for savers and retirees, and measures meant to spur business investment.

Arguing that austerity budgets had delivered a recovery sooner than expected, Britain's chancellor of the Exchequer, George Osborne, laid out new financial plans Wednesday that included help for savers and retirees, as well as measures meant to spur business investment.

Fourteen months away from the next general election, Mr. Osborne stressed that while growth forecasts were being revised up to 2.7 percent this year, more spending curbs were needed to bring the country's shaky public finances back into line.

"The job is far from done," said Mr. Osborne, whose Conservative Party, which leads Britain's coalition government, is appealing to voters not to put the recovery at risk in next year's election by voting the opposition Labour Party into power.

After the financial crash of 2008 and a massive bank bailout, Britain has been seen by some economists as a laboratory for the policies of austerity and retrenchment that took hold across Europe. Even last year, there were fears here that the economy could return to recession.

Because of the brightening economic climate, the budget presented Wednesday was the least controversial in recent years, a sign in itself of Mr. Osborne's improved fortunes.

"There is no major advanced economy in the world growing faster than Britain today," Mr. Osborne said in Parliament, where he announced an increase in the amount employees can earn before paying income tax, to 10,500 pounds, or about $17,450. But Mr. Osborne's room for maneuver remains limited. With the budget deficit "one of the highest in the world" at around 6.6 percent in 2014, Mr. Osborne conceded that "faster growth alone will not balance the books."

But he sought to turn his continued commitment to austerity to political advantage by announcing a cap on welfare spending of Pounds 119 billion in 2015-16. That move is designed both to help restrain expenditures and to present himself as tougher on cutting social security payments than the Labour Party would be.

Meanwhile Mr. Osborne offered a new bond for retirees that offers a good rate of return and proposed a significant change in the way that retirement savings in pension schemes can be used or spent. That could have a big long-term impact on the financial services industry and may also allow some people to spend their savings in the short term, as a spur to the economy. With an election looming, retirees are a crucial demographic group because a high proportion of them tend to vote.

John Fox, director of Liberty SIPP, a provider of pension products, said it was "no coincidence" that the pension measures would give the economy an influx of cash ahead of the election, creating a "feel-good factor. …

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