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Britain Makes Huge Cuts to Avert Debt Crisis

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Henry Ridgwell

Britain's new coalition government has passed an emergency budget after warning the state of the country's finances is much worse than anticipated.

The Clapham Park Estate was once voted one of the worst social housing developments in London.  The window frames are crumbling, the apartments are dark and damp and the estate suffers from high levels of crime, drug use and unemployment.  Many of the residents are reliant on state handouts to get by.  It is places like this that could be hit hardest by cuts in housing and social benefit.

The apartment blocks were due to be demolished and rebuilt, but the money has run out.  Vernon de Maynard is chair of the local residents' association.

"We are asking when we are going to get decent homes," he said.  "They tell us 2016, or 2017 plus ... so again it is the little person at the bottom of the scale who gets it in the neck."

Britain's new chancellor, George Osborne of the Conservative Party, claims the previous Labor Party administration took the country to the edge of bankruptcy.

In an emergency budget he outlined, public spending will be slashed by one quarter over five years, heralding widespread job losses in the public sector and cuts to Britain's welfare state. 

The new budget has been met with angry protests.

"Eighty percent, four-fifths of dealing with this deficit that we are now in, through the bankers and all the problems that they caused, is to be borne by public services workers and the services that they provide," said Dave Prentis general secretary of the public service union, 'Unison'.

Britain's government spent more than $1.25 trillion on bailing out banks following the economic crisis.  It has helped push the deficit in Britain to more than 11 percent of GDP, one of the highest debts in Europe.

The government says Britain, like Greece or Spain, is in danger of losing its triple-A credit rating, so it is slashing spending to balance the books.

Susan Anderson from the Confederation of British Industry, which represents private businesses, says the government is right to take drastic action.

"The U.K. is facing a considerable period of austerity," said Anderson.  "We have got one of the highest deficits in the OECD, we know we need to take action.  We think the government has taken the right balance between cutting public spending and some tax increases."

With its own sterling currency, Britain has been able to keep the euro currency crisis at arm's length.  But Europe is Britain's biggest trading partner, and any problems there hit the British economy.

Economics Professor Wendy Carlin, of University College London, says there is a further risk that simultaneous cuts across the continent will make things worse.

"The problem is if all the big countries in Europe cut spending at the same time it is very difficult to see where the extra sources of demand are going to come from to sustain growth," said Carlin.

Just a mile from the bustle of London's financial district lies Borough Market.  Among the pricey food and drink stalls, Michele Marconi arranges the exotic blooms at her flower shop, Chez Michele.  They are the type of luxury item that are vulnerable in a downturn, and which now face an increase in sales tax to 20 percent.  Michele takes a philosophical viewpoint.

"In my position I cannot do a lot, I just have to follow what happens," said Marconi.  "They are probably going to buy less flowers, but I think if you still maintain quality your customers will always come back."

Such optimism is reflected in the general public.  A recent poll showed 59 percent of British people support the government's spending cuts.  Its message about the danger of the debt appears to be getting through.

But the full effects of the cuts will only be felt in the coming years.  More protests like this seem certain as British society faces it biggest transformation in a generation.

Britain's new coalition government has passed an emergency budget after warning the state of the country's finances is much worse than anticipated.

The Clapham Park Estate was once voted one of the worst social housing developments in London. The window frames are crumbling, the apartments are dark and damp and the estate suffers from high levels of crime, drug use and unemployment. Many of the residents are reliant on state handouts to get by. It is places like this that could be hit hardest by cuts in housing and social benefit.

The apartment blocks were due to be demolished and rebuilt, but the money has run out. Vernon de Maynard is chair of the local residents' association.

"We are asking when we are going to get decent homes," he said. "They tell us 2016, or 2017 plus ... so again it is the little person at the bottom of the scale who gets it in the neck."

Britain's new chancellor, George Osborne of the Conservative Party, claims the previous Labor Party administration took the country to the edge of bankruptcy.

In an emergency budget he outlined, public spending will be slashed by one quarter over five years, heralding widespread job losses in the public sector and cuts to Britain's welfare state.

The new budget has been met with angry protests.

The general secretary of the public service union, 'Unison', is Dave Prentis.

"Eighty percent, four-fifths of dealing with this deficit that we are now in, through the bankers and all the problems that they caused, is to be borne by public services workers and the services that they provide," said Prentis.

Britain's government spent more than $1.25 trillion on bailing out banks following the economic crisis. It has helped push the deficit in Britain to more than 11 percent of GDP, one of the highest debts in Europe.

The government says Britain, like Greece or Spain, is in danger of losing its triple-A credit rating, so it is slashing spending to balance the books.

Susan Anderson from the Confederation of British Industry, which represents private businesses, says the government is right to take drastic action.

"The U.K. is facing a considerable period of austerity," said Anderson. "We have got one of the highest deficits in the OECD, we know we need to take action. We think the government has taken the right balance between cutting public spending and some tax increases."

With its own sterling currency, Britain has been able to keep the euro currency crisis at arm's length. But Europe is Britain's biggest trading partner, and any problems there hit the British economy.

Economics Professor Wendy Carlin, of University College London, says there is a further risk that simultaneous cuts across the continent will make things worse.

"The problem is if all the big countries in Europe cut spending at the same time it is very difficult to see where the extra sources of demand are going to come from to sustain growth," said Carlin.

Just a mile from the bustle of London's financial district lies Borough Market. Among the pricey food and drink stalls, Michele Marconi arranges the exotic blooms at her flower shop, Chez Michele. They are the type of luxury item that are vulnerable in a downturn, and which now face an increase in sales tax to 20 percent. Michele takes a philosophical viewpoint.

"In my position I cannot do a lot, I just have to follow what happens," said Marconi. "They are probably going to buy less flowers, but I think if you still maintain quality your customers will always come back."

Such optimism is reflected in the general public. A recent poll showed 59 percent of British people support the government's spending cuts. Its message about the danger of the debt appears to be getting through.

But the full effects of the cuts will only be felt in the coming years. More protests like this seem certain as British society faces it biggest transformation in a generation.

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