Britain's finance minister George Osborne defended his deficit-slashing emergency budget, arguing that the previous government had left the public finances in a 'massive mess'.
Osborne had unveiled an emergency package of higher taxation and spending cuts yesterday, amid intense concern about sky-high debt levels in Europe.
The Chancellor of the Exchequer slapped a levy on banks, ramped up taxation on goods and services, froze public sector pay and cut welfare spending in an attempt to curb the public deficit.
The Conservative minister said today that the measures were 'tough but fair' and argued that not dealing with the deficit would result in far worse problems for the economy.
'The damage to the economy, the people losing their jobs, will come if we do not sort out our problems in this country, and the welfare bills have got out of control,' he told breakfast television programme GMTV.
'The hole in the public finances was so great and the debts were so large, and people at home know, if you have got a debt problem, you have got to deal with it,' he said.
The remarks come amid intense pressure on coalition partners the Liberal Democrats, who campaigned earlier this year against an increase in value-added taxation (VAT), arguing that it was regressive and hit the poor the hardest.
The Liberal Democrats subsequently formed a coalition government with the Conservatives last month, ousting the previous Labour administration in a general election.
Osborne announced that VAT, levied on goods and services, will now rise to 20% from the current level of 17.5% in January 2011. Liberal Democrat Treasury Minister Danny Alexander has defended the rise in VAT to 20% as 'unavoidable'.
Rating agency Moody's has said the Budget unveiled by Britain's coalition government this week, if successfully implemented, should ensure the UK retains its AAA credit standing.
'The UK budget is supportive of the country's AAA rating and stable outlook because it is a key step towards reversing the significant deterioration in the government's financial position that occurred over the past two years,' Moody's said in a statement.
Osborne's austerity budget was framed against the euro zone debt crisis and concerns that Britain's top-rated AAA credit rating might be at risk.
Ratings agency Fitch said yesterday that the budget measures should 'materially strengthen confidence' in Britain's public finances and credit status.
The Organisation for Economic Cooperation and Development (OECD) praised the emergency budget as a 'courageous move'.
'It provides the necessary degree of fiscal consolidation over the coming years to restore public finances to a sustainable path, while still supporting the recovery. The plan for a gradual reduction in the deficit over the next five years is concrete and far-reaching,' it said.
Reaction from media to 'savage' budget
British commentators were taken aback by yesterday's 'bloodbath' budget, warning the huge spending cuts and tax rises were a gamble that could lead to the new government's demise.
Finance minister George Osborne unveiled his emergency budget yesterday, announcing a levy on banks, increased taxation on goods and services and reduced benefits in a plan aimed at cutting a huge public deficit.
But with Britain's recovery set to be weaker than expected, Osborne's Conservative-Liberal Democrat coalition also delivered tax cuts that were aimed at helping low paid workers and companies.
The extra measures aimed at sweetening the toughest budget in a generation did little to impress the Financial Times, however, which labelled it 'savage'.
'Nothing in the election campaign prepared the British public for this bloodbath,' commented the business daily, which had backed the Conservatives at last month's elections that brought the party into power.
'This gamble has defined the government. If it is seen to have failed, it will be finished,' it added.
The leftwing Guardian went even further, warning the measures could force the British economy 'back into recession'.
Britain escaped from its deepest recession since the 1930s at the end of last year, but its growth remains weak and some commentators argue the cuts being made by the coalition come too early and will endanger the fragile recovery.
Some Conservative-supporting papers threw their weight behind the government's efforts to tackle Britain's financial mess, however.
The Times led praise of the budget, which it said 'combined fiscal conservatism with concern for social justice.'
The Sun tabloid hailed Osborne's crackdown on the reliance on state benefit payments among some people who in reality were capable of going out to work.
'If, out of the ashes of Labour, Mr Osborne creates a self-reliant nation freed from benefit addiction, yesterday's pain will not be in vain,' it said.
