UPDATE 1-UK’s Osborne to detail 6.2 bln stg in spending cuts

* Details of spending cuts to be announced later on Monday

* Cuts are just the beginning, more to follow later in year

(Adds new Osborne quotes)

By Sumeet Desai

LONDON, May 24 (BestGrowthStock) – British finance minister George
Osborne will on Monday outline plans to shave 6.2 billion pounds
($8.9 billion) off the deficit this year by cutting spending and
imposing a recruitment freeze across the civil service.

Britain’s new Conservative/Liberal Democrat government has
said narrowing the budget deficit — running at close to 11
percent of GDP — is its top priority.

The cuts are in line with promises made by Osborne before
this month’s election. Analysts say they are largely cosmetic
and do little to change the overall fiscal picture of a deficit
that is expected to top 160 billion pounds this year.

“We’ve identified wasteful government spending this year
that we are proposing to cut. That amounts to 6.2 billion
(pounds),” Osborne told BBC Radio 4 on Monday ahead of a
detailed announcement on the cuts later in the day.

“Almost all of that will be used to reduce the deficit,” he
said, adding that he was determined to show the world that
Britain could live within its means, staving off worries about
debt like the ones that have caused a deep crisis in Greece.

Investor concerns over sovereign debt in some euro zone
countries have sent global stock markets hurtling downward.

Osborne’s Conservative Party had pledged before the May 6
election to start spending cuts in the current fiscal year
through finding so-called efficiencies. The Lib Dems, who had
said such a move would endanger the recovery and would be a
mistake, have now signed on to the cuts.

“We will be using 500 million pounds to invest in
apprenticeships, further education and some social housing in a
way that is consistent with our coalition partners’ desire to
see some of that money invested in the front line,” Osborne
said.

EMERGENCY BUDGET

Borrowing for 2009/10 was revised lower last week by 7.5
billion pounds, giving the new cabinet some breathing space. At
156.1 billion pounds, it is close to 11 percent of GDP but some
10 billion pounds lower than predicted in March. [ID:nLDE64K0OI]

Still, many government departments could end up seeing
budgets slashed and this could act as a dampener on an economy
which is only just coming back to life.

Treasury officials said they expected Osborne to announce
that government advisory bodies — known as “quangos” — would
lose 513 million pounds in funding.

A saving of 163 million pounds is also expected from
restraining recruitment, including a freeze across the civil
service. Government call centres are also in the firing line.

Osborne has promised an emergency budget on June 22 when he
is likely to announce more significant spending cuts and perhaps
tax rises in order to convince markets that Britain is serious
about getting government borrowing down.

Osborne rejected suggestions that cutting spending at a time
when economic recovery was still fragile could cause a
double-dip recession.

“We sought the advice of the governor of the Bank of England
who was pretty explicit that in-year savings were essential,
that the greatest risk to the recovery was not showing the world
that we could live within our means,” he said.

While an 18-month recession that ended at the end of 2009
has sent Britain’s government debt rocketing, figures released
last week suggested that at least the worst may be over for
public finances with tax receipts up sharply.

“I’m more inclined to think about putting some weight on the
headwinds argument. But of course the question in terms of what
fiscal policy to do is complicated by worries about sovereign
debt and worries about gilts,” Bank of England Monetary Policy
Committee member Kate Barker told the Financial Times.

“So it is very important that the package (June 22 budget)
that’s produced is something which is going to avoid further
rises in gilt yields. And this tells us that fiscal policy faces
some really very difficult choices,” she added.

Investing Advice
(Additional reporting by Estelle Shirbon)

UPDATE 1-UK’s Osborne to detail 6.2 bln stg in spending cuts