Photo Gallery: Saving Until in Hurts in Great Britain

Foto: HO/ Reuters

Lean Times for Great Britain The Pain of Cameron's 40 Percent Savings Plan

Prime Minister David Cameron means business. His chancellor of the exchequer, George Osborne, has asked most ministries to lop 40 percent off their budgets, meaning the coming years are likely to be filled with protest and pain.

She is 84 and her husband is 89 -- after decades of hard work, now this: Her funds are running out. The amount of money the old lady still receives from the state is no longer enough to pay for the respectable lifestyle to which she is accustomed.

The roof is leaking and the pipes are still made of lead. Removing the asbestos from the walls and ceilings is too expensive, and the furniture has clearly seen better days. At the moment, the mistress of the house is drawing on the reserves she invested in better days, but starting in 2012, even that money will run out.

At that point, Queen Elizabeth II will have been on the throne for exactly 60 years and, for the first time, she might be just a little broke. As a private citizen, she will still be ranked among the world's richest people. But the relatively modest sum she receives from her government every year will no longer be sufficient to cover her official expenses as head of state.

What happens then? Will the Queen sack her bagpipe player, who plays outside her window every morning between nine and 10 a.m.? Will she pawn the crown jewels? Or perhaps even go on strike?

Absolutely not. Instead, Her Majesty will keep a stiff upper lip; she will economize, stretch a little and make compromises, and in the end, she will not be abandoned by the nation -- neither will her family and certainly not Queen Victoria's crumbling mausoleum near Windsor Castle, which is in urgent need of repair. But aside from that, certainty is currently in short supply in the United Kingdom. These are strange and uncomfortable times, both in Buckingham Palace and everywhere else.

Saving Until it Hurts

The government, deep in debt and ruled by a new coalition of Liberals and Conservatives, plans to save until it hurts. The hardships and humiliations the British are likely to face could be worse than what Greece, a significantly smaller financial patient, is currently going through. According to economist Mike Devereux of the University of Oxford, the austerity program unveiled by George Osborne, 39, the youngest chancellor of the exchequer in 120 years, is more radical than anything the Greek government has approved to date. Even the famously icy hand of former Prime Minister Margaret Thatcher in the 1980s felt, by comparison, gentle.

Prime Minister David Cameron had announced a new "era of austerity" even before the election. Now he threatens to keep his word.

These days, Cameron puts on a very serious face when he refers to the British, and warns his fellow citizens that no one will escape the cuts. "The decisions we make will affect every single person in our country. And the effects of those decisions will stay with us for years, perhaps decades to come," he said in a June speech.

Of course, Cameron never forgets to assign the blame for all of this to the previous administration. He insists that New Labour destroyed the government's finances, and that the situation was far worse than expected when he came into office. And although he likes to point out that he has gained the approval of the G-20 nations and the European Union for his course of austerity, he neglects to mention the sharp criticism coming from the International Monetary Fund (IMF). It fears that the rigid cutbacks in public spending could jeopardize the economic recovery.

Osborne, for his part, is playing the supreme commissioner of frugality, a role in which he seems to enjoy announcing bad news to the British public. Because of his age and lack of experience, he was long a target of derision, even from within his own ranks. But now he is coming back at his detractors with the inexorable vengeance afforded by position. "Daddy might not always be very popular," Osborne told his young son a few months ago.

Forty Percent Budget Cuts

This year, Great Britain has a record budget deficit of £174 billion, or about €197 billion ($248 billion), equal to 12 percent of gross domestic product. Osborne hopes to have almost completely balanced the budget by the next election in five years.

First, he forced almost every cabinet minister in Whitehall to come up with detailed plans on how to save 25 percent of their budgets by the end of the legislative period. The wailing had hardly subsided before Osborne struck again, telling cabinet ministers that 25 percent wasn't enough, and that he wanted them to describe what they would have to do to reduce their expenditures by as much as 40 percent.

The only public sectors Osborne intends to spare are the national health system and foreign aid. The bloodletting will also be less severe at the Defense Ministry. Everything else is potentially dispensable for Osborne. In the future, ministers will have to defend their budgets, million by million, before a tribunal made up of leading experts.

Osborne, an old-school conservative, seems to relish the denationalization of Great Britain. He defends himself by insisting that his cuts are "unavoidable," and that his demands on the country as "tough, but fair."

The financial markets, at any rate, are satisfied with him. The British pound, too, has gained in value.

But in London's government district, tens of thousands of office jobs threaten to fall victim to the large-scale cutbacks. Tens of thousands of police officers are also likely to become unemployed soon. Streets will no longer be repaired quite so quickly, and streetlights will be switched off earlier at night. No new schools will be built, nor will there be any new hospitals or prisons. Universities will have to reduce personnel, while libraries and theaters could shut down entirely.

Grim Outlook

Experts estimate that more than 600,000 people will lose their jobs in the public sector in the coming years. The salaries of most civil servants have already been frozen, and now even adjustments for inflation are off the table. The previous government's generous pension promises will be cancelled. And in January, everyone in Britain will be paying two-and-half percent more in value-added tax (VAT), at the new rate of 20 percent. Other taxes will also go up, even as spending on low-income housing will decline.

With this grim outlook, Great Britain can expect a turbulent autumn. Labor unions have announced massive protests. "There will be more resistance than we've seen in decades," says Mark Serwotka, the head of the Public and Commercial Services Union, which represents many government workers. Some are already envisioning rioting in the streets, last seen in the 1980s.

No government since the end of World War II has imposed such severe spending cuts on the population. Nevertheless, the timing couldn't be better for the conservatives, because there is practically no opposition at the moment. Since the resignation of former Prime Minister Gordon Brown, the Labour Party is leaderless and doesn't plan to elect a new chairman until the end of September. But by then it will be too late for Labour to take much action before the government releases its final list of spending cuts on Oct. 20 -- a list which could transform Great Britain into a different country.

Until then, the only appreciable political resistance could come from the street -- and from within the ranks of the government itself, where there is growing unrest. A coalition is running the country for the first time in 65 years. Officially, the Liberal Democrats approve of the Cameron-Osborne plan, but their supporters do not.

Currently only two-thirds of them say they would vote "LibDem" again. They have not forgotten that the left-leaning Liberal Democrats campaigned on a different platform. On the stump, for example, the party was vehemently opposed to a VAT increase.

Salary Cuts for Keeper of the Privy Purse

Still, Nick Clegg, the leader of the Liberals, has managed to achieve his most important goal. Next May, the British will vote in a referendum on reforms to their antiquated election system -- assuming, of course, that the current government still exists by then.

Economists are now as deeply divided as politicians over the question as to whether Cameron and Osborne deserve applause or loathing for their austerity program. Should governments go on strict diets or should they continue to spend borrowed money to stimulate demand? The relatively conservative Economist concludes that both sides are guilty of gross exaggeration in this debate, but that the austerity lobby is clearly the more dangerous of the two. Although, as The Economist points out, the country is unlikely to face a 1930s-style depression, it is clear that those who favor sharp cuts in government spending will at least delay the recovery.

Scheduled, apparently, for the midst of the crisis, festivities to celebrate the Queen's Diamond Jubilee in 2012 may be less ostentatious than originally planned, as the crown bows to the dictates of the chancellor of the exchequer. Her Majesty's experts are currently examining ways to cut costs -- by 25 percent or more.

No one will escape the cuts. The Queen has reduced the salary of the Keeper of the Privy Purse, who manages the financial affairs of the royal household. She has imposed a hiring freeze, and positions that become vacant are only filled in exceptional situations. She has also cancelled the 24-hour bodyguard service for two of her granddaughters, the Princesses Beatrice and Eugenie.

The reward for such privations is that this year every Briton will be asked to spend only 62 pence for his queen -- 7 pence less than in the previous year. But according to a recent study, the Windsors, with a total budget of more than £38 million, or about €45 million ($57 million), remain Europe's most expensive royal family.

Translated from the German by Christopher Sultan
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