[ccebook.cn]The World in 2010

Britain
The slimming cure
Nov 13th 2009
Britain’s bloated state faces strict rations
If the Conservatives win power, as is likely, their first step will be an emergency budget. A tough budget will
be essential. In 2010 Britain will run a deficit almost as high as the one in 2009, which was easily the biggest
since the second world war. Public debt will reach 82% of GDP, nearly double its share in 2007.
The rise in debt is from a relatively low starting-point, but the deterioration is so rapid that bond investors are
uneasy. They are expecting a new government to deliver a credible programme to get the deficit under
control. If they are disappointed, Britain could lose its triple-a borrowing status and face higher interest costs,
exacerbating the fiscal crisis.
George Osborne, replacing Alistair Darling as chancellor, will inherit an already unpalatable plan to rein in the
deficit. As Britain’s borrowing surged in 2008 and 2009, Mr Darling set out a strategy for mending the public
finances after the recession ends. That entails measures to cut borrowing by over 3% of GDP by 2013. Higher
taxes were to make up only a fifth of the reduction. The rest would come from lower spending, with
investment in particular facing deep cuts.
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