| LONDON, June 26
LONDON, June 26 Britain's finance minister
George Osborne will unveil on Wednesday his plans for another
round of government spending cuts as he tries to keep his
deficit-reduction drive on track and free up cash for fresh
After weeks of tough negotiations that have strained
relations among ministers trying to protect their turf, the
Treasury clinched a deal at the weekend with hold-out
That clears the way for Osborne to provide details in a
parliamentary speech on where the axe will fall as he announces
11.5 billion pounds ($17.7 billion) of spending cuts in the
2015/16 fiscal year.
Osborne has billed the spending round as part of his plan to
move Britain "from rescue to recovery," although economists
expect little or no impact on the trajectory of the country's
"It is important to realise that this will not affect the
overall spending envelope or the projected budget deficit at
all," said Brian Hilliard, an economist at Societe Generale.
"Osborne's plan is to release some funds from the current
spending budget so that he can increase infrastructure spending
without deviating from his overall fiscal plan."
By promising to reinvest more than a quarter of the money
saved, Osborne will seek to deprive the opposition Labour party
of room to air their frequent criticism that cutting public
finances aggressively has hindered economic recovery.
In recent months backing for Britain's austerity agenda has
been damaged by the loss of its triple-A credit rating and calls
from the International Monetary Fund to defer near-term cuts and
increase infrastructure investment.
While spending on international aid, health and education
has been protected, all other departments were asked to offer
cuts of 8 to 10 percent of their budgets.
Despite cutting spending aggressively, weak economic growth
and a costly welfare system have set back the government's
original plans to wipe out by 2015 a budget deficit that stood
at 11.2 percent of gross domestic product in 2009/10.
The latest official forecasts show that by 2017/18 Britain
will still be spending more than it recoups in tax, to the tune
of 2.3 percent of GDP.
Around 3 billion pounds of money saved is expected to be
ploughed back into infrastructure spending, the Treasury said.
Details of the government's capital spending plans will be
announced on Thursday.
"We need quick and decisive action on the big decisions that
will move projects from blueprints to building," said John
Cridland of the Confederation of British Industry, which
represents nearly a quarter of a million businesses.
The cuts to be announced on Wednesday will take effect as
Britons go to the polls to elect a new government in 2015. The
opposition Labour party has said it will stick to the
government's lower day-to-day spending plans, but will invest
more on infrastructure.