Greece isn’t the only country tightening its belt

Austerity in the U.K. is continuing despite its continued economic growth, with Chancellor of the Exchequer George Osborne seeking budget cuts between 25 and 40 percent to some government departments.

With education, health, defense and foreign aid ring-fenced from cuts in his Conservative Party's electoral promises, Osborne is looking for big reductions elsewhere. He is expected to update further on where the axe will fall on November 25.

One way of partly addressing the U.K.'s budget deficit, which is still one of the largest among its peers in the world's advanced economies, could be to embark on a sale of government property assets.

George Osborne, the Chancellor of the Exchequer, poses before presenting his annual budget to Parliament, outside 11 Downing Street on March
John Phillips | UK | Getty Images

The pace of deficit reduction is slightly slower than hoped for, with borrowing (once the ownership of stakes in U.K. banks is excluded) of £9.4 billion ($14.7 billion) in June - £800 million lower than the same time last year, according to figures released on Tuesday. This represents an 8 percent annual decline, while the independent Office for Budgetary Responsibility forecasts borrowing to come in 22 percent lower over the course of the year.

Bank of England Governor Mark Carney seemed cautious about the U.K.'s prospects in a speech on Tuesday night, citing the weak euro zone recovery and a stronger pound as the main headwinds facing the economy.

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Economists are divided on whether further cuts are the answer, and there has been some harsh criticism of Osborne's austerity focus.

"Britain's financial sector was hit hard in the recession and, together with lower oil and gas output, our ability to generate tax revenues has been seriously constrained. Therefore, we have to continue to focus on other means to tackle the deficit - including cutting current government spending," David Kern, chief economist at the British Chambers of Commerce, said in a statement.

"The government must also put more emphasis on policies that will boost economic growth, most obviously infrastructure investment and supporting exports."

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Consumers are likely to feel the pinch over the next few years, with measures including squeezes on welfare payments and increases in household taxes, according to the Ernst & Young ITEM Club.

"The Chancellor has effectively passed the prime responsibility for supporting low-income working people over to employers and this poses a clear risk to hours and employment," Peter Spencer, chief economic advisor to the EY ITEM Club, said in a statement.

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