Further austerity likely in Britain's 2013 budget

Updated: Monday, 18 Mar 2013 11:11

Britain's finance minister is set to stick to his guns on austerity in this week's budget, despite increasing calls for a change of course, as he bets that growth will get back on track before an election in 2015.

Monetary policy - not tax and spending - may see the biggest shift in George Osborne's budget statement on Wednesday.

There are signs he plans to tweak the Bank of England's inflation-fighting remit to spur a recession-threatened economy.

Near-zero growth and slow progress on deficit reduction have battered Osborne's reputation since he helped the Conservatives to power in 2010 with promises of bold change.

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He now ranks as Britain's least popular finance minister in almost 20 years.

Once viewed as his party's foremost tactician, Osborne will be glad if he can avoid the political blunders of last year's budget when a series of U-turns pushed the Labour party's lead over the Conservatives to more than 10%.

Polling firm Ipsos MORI said last week the Conservatives had their lowest share of voter support in a decade at 27%.

Osborne said yesterday there was no alternative to austerity, and that slowing deficit reduction would put Britain at risk of the same fate as Cyprus which has announced a levy on bank accounts to help fund an international bail-out.

"In the end this country has got to pay its way. We can't just keep on thinking the answer to our problem is more borrowing," he told BBC television.

The opposition Labour Party wants a slower pace of cuts, and its finance spokesman Ed Balls yesterday damned the government's policies as "the economics of the lunatic farm".

"The only reason why they won't now change course is to avoid their own political humiliation," he told the BBC.

Some Conservatives are pressing Osborne for tax breaks, funded by cuts in welfare and overseas aid, and increasingly murmur about Prime Minister David Cameron's leadership.

However Mr Cameron backs Osborne. "This month's budget will be about sticking to the course," he said on March 7.

Media reports have said the government was likely to press on with plans to lower corporation tax and raise the amount of income people can earn without paying tax, as well as postpone rises in fuel tax, increase childcare subsidies and issue £10 billion in government guarantees for new home-building.

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