October 21, 2010
By Sally McNamara
Britain's Conservative- led government inherited one of Europe's most debt-ridden economies. On Wednesday, Prime Minister David Cameron and Chancellor George Osborne unveiled their plan to put the nation's fiscal "flat" in order.
Their Comprehensive Spending Review pledges to eliminate Britain's structural deficit in this Parliament's lifetime. Unlike the French now rioting in the streets of Paris, the Brits are taking their fiscal medicine stoically.
The CSR announces $127 billion (81 billion pounds) in cuts -- enough to slash government spending by nearly a fifth. With a few exceptions, the CSR represents a largely conservative agenda -- lowering government spending, cutting welfare, making work pay and reducing the eye-watering $68 billion a year spent servicing British debt.
Part one of the plan can be neatly summed up as "rolling back the state." After 13 years of Labor government, government has grown to the point of bursting. The number of pointless and meddlesome "quangos" (quasi-autonomous nongovernmental organizations) has gone from the sublime to the ridiculous: British taxpayers fund (among others) an Advisory Committee on Organic Standards, a Spongiform Encephalopathy Advisory Committee and a Zoos Forum. Not anymore: Some 192 quangos got the ax.
The CSR also slices Britain's bloated welfare bill. A Byzantine complex of work-tax credits and overly generous welfare payments left many Brits wondering whether it was more profitable to get a job or get on the dole line. The savvy Work and Pensions Secretary, Iain Duncan Smith, set out early on to answer the question once and for all: The state won't be an ATM for the work-shy.
By declaring that "there's no Plan B" after Wednesday's announcements, Osborne sent a message to the markets that Britain is back in business. Hanging the open sign on the shop door and restoring predictability to the UK economy are critical to the second part of Osborne's plan -- private-sector-led growth.
Osborne can't cut his way out of the mess Labor left; he needs to grow the economy, too.
Two areas of public spending conspicuously escaped the guillotine: the National Health Service and foreign aid. For electoral reasons, Cameron promised early on that the NHS would be "safe" in Conservative hands -- i.e., not subject to cuts -- despite being the largest employer in Europe.
The NHS has become the sacred cow of British politics, even though thousands of middle managers could be cut tomorrow without harming front-line services. But no political leader is willing to risk being seen as the NHS' grim reaper.
The NHS exemption is understandable, politically. Not so, that for international aid. When the Brits are being asked to work longer and harder, why should India, the European Union, the World Bank and the United Nations get more of their hard-earned pounds -- increased to $20 billion a year (0.7 percent of the national income) over the next four years?
And this, along with significant cuts to Britain's vastly overstretched defense budget. Defense Secretary Liam Fox did his best to protect one of the finest militaries in the world -- and America's closest military partner -- but he could only do so much, having to find $2.7 billion in savings.
The legendary Harrier jets, the Nimrod and the flagship of the fleet, HMS Ark Royal, are all out. Britain will have no land-shore capability for operations like the one it carried out in 1982, when Argentina invaded the Falkland Islands. Soldiers, sailors, airmen, tanks, armored vehicles, frigates and destroyers will all be cut, too.
It's not for nothing that Secretary of State Hillary Clinton stated last week that America was concerned about Britain's future commitment to NATO. At least the UK will maintain its defense spending above NATO's benchmark of 2 percent of GDP -- unlike most of her European allies.
Cameron and Osborne have spent the best part of this year pulling back Britain from the financial brink. Although they had no part in the cause of Britain's economic collapse, they've proved themselves determined to find a solution; simply blaming the last guys isn't enough. Only time will tell whether they've done enough to restore Britain to long-term economic competitiveness.
Sally McNamara is a senior analyst in European affairs at the Heritage Foundation.
First appeared in The New York Post
Senior Policy Analyst, European Affairs
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