Key Passages of Osborne’s Austerity Budget

The following is the beginning of the Chancellor George Osborne’s speech today before the British House of Commons on the 2010 Budget.

This emergency Budget deals decisively with our country’s record debts. It pays for the past. And it plans for the future. It supports a strong enterprise-led recovery. It rewards work. And it protects the most vulnerable in our society. Yes it is tough; but it is also fair. This is an emergency Budget, so let me speak plainly about the emergency that we face. The coalition Government has inherited from its predecessor the largest budget deficit of any economy in Europe with the single exception of Ireland. One pound in every four we spend is being borrowed. What we have not inherited from our predecessor is a credible plan to reduce their record deficit. This at the very moment when fear about the sustainability of sovereign debt is the greatest risks to the recovery of European economies.

Questions that were asked about the liquidity and solvency of banking systems are now being asked of the liquidity and solvency of some of the governments that stand behind those banks. I do not want those questions ever to be asked of this country. That is why we have set a brisk pace since taking office. In the last seven weeks: We have announced, conducted and completed a review of this current year’s spending and identified six billion pounds of savings. We have announced, established and received the report of the independent Office for Budget Responsibility. The power the Chancellor has enjoyed for centuries to determine the growth and fiscal forecasts now resides with an independent body immune to the temptations of the political cycle. And we have examined, decided on and in some cases halted the mass of unfunded commitments, IOUs and overcommitted reserves that greeted us on entering office. This early, determined action has earned us credibility in international markets. It has meant that our promise to deal decisively with the deficit has been listened to. Market interest rates for Britain have fallen over the last seven weeks, while those of many of our European neighbours have risen. Those lower market interest rates are already supporting our recovery.

But unless we now deliver on that promise of action with concrete measures, that credibility – so hard won in recent weeks – will be lost. The consequence for Britain would be severe. Higher interest rates, more business failures, sharper rises in unemployment, and potentially even a catastrophic loss of confidence and the end of the recovery. We cannot let that happen. This Budget is needed to deal with our country’s debts. This Budget is needed to give confidence to our economy. This is the unavoidable Budget. I am not going to hide hard choices from the British people or bury them in the small print of the Budget documents. You’re going to hear them straight from me, here in this speech. Our policy is to raise from the ruins of an economy built on debt a new, balanced economy where we save, invest and export. An economy where the state does not take almost half of all our national income, crowding out private endeavour. An economy not overly reliant on the success of one industry, financial services – important as they are – but where all industries grow. An economy where prosperity is shared among all sections of society and all parts of the country.

In this Budget everyone will be asked to contribute. But in return we make this commitment. Everyone will share in the rewards when we succeed. When we say that we are all in this together, we mean it. Mr Deputy Speaker, the first challenge for this Budget is to set the fiscal mandate – or in other words, our overall objective for the public finances. The previous Government had two fiscal rules, one for debt and one for the current budget. They were supposed to force Chancellors to set aside money in the good years so they could borrow sustainably when the economy turned down. They completely failed in that task. And as this is the last budget in which this golden rule will appear, I would like to be the last Chancellor to report on it. We are set to miss the golden rule in this cycle by 485 billion pounds. We now know the intrinsic weakness in backward-looking fiscal rules. Past prudence was an excuse for future irresponsibility. And the judge of the rules was the very same Chancellor they were supposed to be restraining.

We propose a more credible approach. Our fiscal mandate will be forward-looking, and the judge of whether we are on course to meet it will be not the Chancellor but the independent Office for Budget Responsibility. On behalf of the House, I want to thank Sir Alan Budd and his fellow Committee members, Geoffrey Dicks and Graham Parker, for their highly professional effort. In the space of just seven weeks I believe we have established the Office for Budget Responsibility as a permanent improvement to economic policy making and the transparency of government. The legislation to put the Office on a statutory footing will now be drawn up and I hope it will command all party support. I now turn to what that fiscal mandate will be. The view of the international community was clearly expressed at the latest G20 meeting, and we will be taking the same message to the G20 summit in Toronto this weekend. Surplus countries should do more to support global demand. So we welcome China’s announcement to come off the dollar peg. At the same time the international community believes countries with high fiscal deficits need to accelerate the pace of fiscal consolidation. That is precisely what we now propose to do. The formal mandate we set is that the structural current deficit should be in balance in the final year of the five-year forecast period, which is 2015-16 in this Budget.

Sources

2010 Budget – HM Treasury Website

Budget 2010: Full text of George Osborne’s statement – The Telegraph