Roundup: British gov't faces big cuts ahead despite tax increases in budget

The third budget of the year from British finance minister George Osborne heralds large cuts in government spending, according to experts.

British Chancellor of the Exchequer George Osborne delivered his third budget of the year on Wednesday, the previous two being a final budget before the May general election and an emergency budget after the Conservatives returned to government after the election.

The latest budget will see cuts of 18 percent averaged across most government departments; only health, schools, foreign aid, military spending and spending on the devolved parliaments in Britain are exempt.

This will, for example, mean that the Department for Work and Pensions will see its budget cut by 15 percent by 2019-2020. It will also mean that there will be 100,000 fewer civil servants in 2019/2020 than now, the lowest level since before the Second World War.

At an in-depth analysis of the budget, known as the autumn statement, by the think-tank the Institute for Fiscal Studies (IFS), institute director Paul Johnson said that there were "still some very significant cuts ahead."

But Johnson was at pains to tell his audience of journalists and academics that Osborne's budget was "also a tax raising budget." Johnson added, "A 3 billion pound (about 4.52 billion U.S. dollars) tax on the payrolls of companies with paybills over 3 million pounds is substantial, as is an increase in stamp duty land tax of nearly 1 billion pounds on second homes and buy-to-let properties."

Osborne's tax-raising and cost-cutting budget came after five years of strong downward pressure on government spending, which had expanded substantially in immediate response to the financial crisis of 2008.

After David Cameron became prime minister in 2010 following an inconclusive general election, supported by his Conservative Party and the Liberal Democrats in a coalition, his government set about implementing an austerity program that saw government spending fall from 46 percent of gross domestic product (GDP) to 40 percent in five years.

Now that Cameron is prime minister again, this time of a Conservative government, chancellor Osborne has set out a continuing program of cuts and tax increases with the primary aim of eliminating the public sector net borrowing requirement, what the government borrows to fund its programs, and turning it to surplus by 2019/2020. The deficit was 93.5 billion pounds for 2014-2015, according to government figures.

Johnson said this demonstrated that the budget was "not the end of austerity. This spending review is still one of the tightest in post-war history." (One British pound=1.51 U.S. dollars) Endit