UK Reins in Deficit to Avoid Overtaking Greece

The U.K.’s triple-A credit rating may be in doubt but finance minister George Osborne has told CNBC that the country’s austerity drive has attracted overseas investment and that he will continue to tackle the debt problems head on.

George Osborne
Photo: Getty Images
George Osborne

Osborne announced a string of further measures at the Conservative Party Conference on Monday including an extra 10 billion pounds ($16 billion) in cuts annually from the welfare budget.

“We're one of those Western countries getting on top of debt problems,” he told CNBC Monday.

“We've got a credible plan to reduce our budget deficit that's delivering very low interest rates for us in the markets at the moment. That is the proof that there's international confidence in our plan.”

Speaking at the conference he detailed lessons from past Conservative governments and lauded the resolve of Margaret Thatcher.

"In 1981, when another Conservative Prime Minister and Conservative Chancellor two years into office were faced with economic problems and powerful unions, we did not give up, but pressed on and overcame," he said.

"Today, in the face of the great economic challenges of our age we here resolve: we will press on and we shall overcome."

David Riley, Head of Global Sovereign Ratings at Fitch, told CNBC in August that any deviation from the current austerity plan in the U.K. could affect its triple-A rating. The country is currently experiencing a double-dip recession but yields on its benchmark 10-year government bond are at record lows this year.

“I’m setting out new measures and new ideas, for example, in our welfare system and entitlements to make sure that this country continues to live within its means and at the same time has a tax system that attracts international business,” Osborne said.

“We’re going to go on making the reforms to our tax system to make this the competitive place to come and do business, to come and invest and create jobs.”

In September investment bank Morgan Stanley said that the country’s deficit could surpass Greece's in 2013-2014 and some economists have told CNBC that Osborne has yet to even begin any of the tough cuts that he originally promised.

The Financial Times calculated on Monday that the U.K. will not get its deficit under control until 2018. It currently lies at around 8.3 percent of GDP according to the Office of Budget Responsibility.

Business minister Michael Fallon reiterated Osborne's view that the coalition-led government needs to continue on its current track.

“We’re going to get through to the end. We’ve got a worse deficit than Greece or Spain or Portugal, we have to see this through,” he told CNBC Monday.

“What you’re going to hear today is a whole string of policies to make sure that business is freed to create the new jobs.”