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UK welfare cuts needed if taxes are to drop: Osborne.

UK Chancellor of the Exchequer George Osborne set out his plan for the economy, holding out the possibility of tax cuts funded through more welfare savings.

In a speech on Monday in Birmingham, central England, he said that while the British economy is "on the rise," Au25 billion ($41 billion) of government spending cuts will be needed after the 2015 election, with half of that coming from welfare. He said any permanent tax cuts would require matching reductions in spending.

"Welfare cannot be protected from further substantial cuts," Osborne said. He described 2014 as the year of "hard truths" and said "government is going to have to be permanently smaller and so too is our welfare system."

Prime Minister David Cameron told the BBC on Sunday that any future tax cuts would be targeted "at the lowest-paid." Though unemployment has fallen and the recovery taken hold, the Tories are still trailing the opposition Labour Party in the polls, with the latter arguing the rising cost of living is eroding the benefits of the faster growth.

"Osborne should admit his policies have failed and led to a cost-of-living crisis," Chris Leslie, a lawmaker who speaks for Labour on economic affairs, said in an e-mailed statement.

In order to avoid deeper cuts to government departments, welfare savings of Au12 billiion will be needed in the first two years of the next parliament, Osborne said. The Institute for Fiscal Studies estimates that without squeezing welfare, the amount spent on public services would have to fall to its lowest share of national income since 1948.

In his Autumn Statement on December 5, Osborne set out plans to return the budget to surplus in 2019 for the first time since 2001. He has cut welfare by more than Au20 billion since taking office in 2010 and is proposing to introduce a cap on Au100 billion of social-security spending, excluding state pensions.

"There are big underlying problems we have to fix in our economy," Osborne said. "More repairs. More cuts. More difficult decisions."

The UK's fiscal watchdog last month raised its forecast for economic growth in 2014 to 2.4 per cent from 1.8 per cent and said government borrowing would be less than previously predicted. Bank of England Governor Mark Carney has acknowledged that the recovery has "taken hold."

Nevertheless, support from within Tory ranks has waned. A poll published two days ago found that 37 per cent of voters who backed the Tories in the 2010 election no longer support the party, and half of them had defected to the anti-European Union UK Independence Party. That's in spite of the fact that Cameron still outpolls Labour leader Ed Miliband on personal approval and economic management, according to the survey commissioned by Conservative upper-house lawmaker Michael Ashcroft.

Osborne also said immigration needs to be reduced, as uncontrolled immigration brings pressure on public services and leads to abuses of the welfare system. The Sunday Times published a leaked Home Office paper last month suggesting Home Secretary Theresa may favour a cap on migration from the European Union of 75,000 a year.

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Publication:Khaleej Times (Dubai, United Arab Emirates)
Geographic Code:4EUUK
Date:Jan 7, 2014
Words:532
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