* Osborne speaks at Thomson Reuters Newsmaker event
* Says must get to grips with fundamental cause of deficit
* RBS break-up decision due in next couple of weeks
* Osborne defends Royal Mail sale price
By David Milliken and William James
LONDON, Oct 22 Britain's finance minister vowed
to stick to the path of austerity, saying economic recovery on
its own would not be enough to fix the budget deficit and the
causes of over-spending still needed to be addressed.
George Osborne, speaking at a Thomson Reuters Newsmaker
event on Tuesday, also said he was "a couple of weeks" away from
deciding whether to split up state-owned Royal Bank of Scotland
and rejected criticism that the government sold Royal Mail too
Osborne claimed some credit for Britain's long-awaited
economic recovery, saying it was being helped by his refusal to
budge from his austerity plan despite widespread criticism,
including from the International Monetary Fund.
"I think we already see the benefits in the UK of having a
clear economic plan and sticking to that economic plan," he
Figures released earlier on Tuesday showed Britain's public
finances improved in September, helped by higher tax revenues.
And on Friday more data is expected to show Britain's economic
growth reached its fastest pace in three years between July and
Osborne warned that growth alone would not fix the
fundamental problems in Britain's public finances and the
government would have to take "very difficult decisions".
"An improving economic situation in the UK does not
automatically lead to a windfall for the public finances because
we shouldn't assume that a structural deficit is solved by an
improvement in GDP," Osborne said.
"It's called a structural deficit for a reason," he said.
Osborne said earlier this month that if re-elected in 2015,
a Conservative government would aim to wipe out Britain's budget
deficit altogether by 2020 and use a surplus to pay down the
NO REGRETS ON ROYAL MAIL, RBS DECISION NEXT
Osborne said he would decide within the "next couple of
weeks" whether to split up state-owned Royal Bank of Scotland
, so that at least part of the bank could be returned to
the private sector.
RBS was taken into public ownership at the height of the
financial crisis in 2008, and the government is now reviewing
whether to hive off potentially toxic assets into a 'bad' bank
that would remain in public hands, so that the rest of the bank
can operate with a clean sheet.
"If you look at Lloyds, you can see that if you get the
strategy right, and you instil some market confidence, and the
government can start to exit from the banks, there is an
encouraging path there for RBS," he said.
A 6 percent chunk of Lloyds Banking Group was sold
to institutional investors in September, and earlier this month
a majority stake in postal operator Royal Mail was sold
to the public and financial institutions.
Shares in Royal Mail soared nearly 40 percent above the sale
price on its first day of trading.
Osborne rejected criticism that it had been sold off too
cheaply, saying initial public offerings were usually discounted
and that the government had received professional advice from
banks as to the correct price.
"On all fronts it has been a great success," he said.
Osborne was making his first public appearance since
travelling to Washington for annual meetings of the IMF and then
on to China where he lead a trade and investment mission.
He said his U.S. counterpart Jack Lew and top Republicans in
Congress, John Boehner and Paul Ryan, had all stressed they
understood the "very, very serious consequences" of any default
of U.S. debt, something averted for now by last week's deal to
raise the U.S. debt ceiling.
Osborne, asked about talks for a possible U.S.-European
Union free trade agreement, said he hoped financial services
would not be excluded.
France has so far blocked the inclusion in the talks of the
audiovisual sector - which includes its cinema industry. The
United States wants to carve out financial services, something
that would frustrate the City of London financial hub.
On China, Osborne stressed the importance of making London
the world's second-biggest offshore hub for trading in China's
renminbi currency after Hong Kong, something he sought to
encourage with a deal last week which will make it easier for
banks from China, and other countries, to set up in Britain.
Osborne stressed there had would no special treatment for
"(Chinese banks in Britain) will be well-regulated ... there
has been some comment that this was a special deal for the
Chinese. This is a deal available to other banks provided they
meet the criteria."