Osborne announces extension of austerity

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LONDON, Dec. 6 (UPI) -- British Chancellor of the Exchequer George Osborne announced a combination of tax cuts and cuts in spending on welfare Wednesday in his autumn statement.

Osborne said the package is necessary because of predictions the economy will slow in the coming months, The Guardian reported. He said the country will be on an austerity budget until 2018.

The independent Office of Budget Responsibility said the British economy will contract slightly in 2012 with only modest growth in 2013.

"It's a hard road, but we're getting there," Osborne said. "Britain is on the right track -- and turning back now would be a disaster. We have much more to do."

On the tax side, Osborne said corporation taxes will be cut, plans to increase the duty on fuel dropped and businesses given more generous allowances for investment.

But increases in unemployment benefits will be held to 1 percent, below the rate of inflation, saving $6 billion. Osborne said the government plans to wring another $50 billion from government departments after 2014.

Bond-rating agency Fitch responded to Osborne's plans by saying the country will probably lose its Triple-A credit rating. The agency said the determining factor was Osborne's announcement that debt will not fall as a percentage of gross domestic product until 2016-2017, a year later than previous projections.