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New UK govt take five percent pay cut at first cabinet meeting

At David Cameron’s first cabinet meeting as UK prime minister Thursday the newly elected coalition government cut its own pay by 5% to demonstrate their seriousness on tackling the budget deficit.


REUTERS - Britain's new coalition government cut its own pay by five percent on Thursday in a statement of intent about tackling a record budget deficit.

The centre-right Conservatives and smaller centrist Liberal Democrats this week agreed on what critics call an unstable partnership of expedience after an inconclusive election.

Reducing Britain's record budget deficit of over 11 percent of national output will be the

"What will come after the honeymoon period?"

first test of the relationship.

A five percent pay cut for all ministers was agreed at the first meeting of the new cabinet on Thursday. Most senior ministers are paid more than 140,000 pounds ($206,800) -- a generous salary in Britain.

Markets are looking for signs the Conservative-led coalition will quickly implement a plan to tackle the 163 billion pound ($243 billion) deficit by trimming public spending, initially by 6 billion pounds this financial year.

"We are all very aware of the seriousness of the situation and frankly if we don't have a credible programme to reduce the deficit...then we won't have the confidence of the markets and the confidence of the country," Culture Secretary Jeremy Hunt told reporters after the hour-long meeting.

Sales tax rise

The government has promised an emergency budget within 50 days. Cameron said on Wednesday the government had the worst economic inheritance of modern times in Britain.

Economists quoted by British media said they also expected a rise in the VAT sales tax from the current 17.5 percent.

The head of British supermarket group J Sainsbury said on Thursday that consumer

Clegg and Cameron - the press conference in full

spending would remain subdued and the focus should be on spending cuts rather than raising taxes to clean up finances.

"If the government does decide to increase VAT, they should give us good notice and they should be firm on the fact that that is going to stick for a very long time," King told BBC radio. "We don't want to see VAT swinging around in an uncertain and unpredictable way. It's very costly and complex for retailers to change VAT."

Other legislation expected on the agenda soon is a plan for a banking levy, a commission to investigate separating retail and investment banking and plans to give the Bank of England more clout as a financial watchdog.

The atmospherics of the new partnership between Conservative leader Cameron and his deputy Liberal Democrat leader Nick Clegg dominated newspapers, with most focusing on their new friendship after weeks of sniping at each other on the campaign trail.

Commentators warned of trouble ahead given the two parties' traditional ideological differences and Britain's lack of experience with coalition rule. The new parliament includes a large number of new members with little Westminster experience.

 However, markets have so far reacted positively to the commitment to make an early start on spending cuts. Turmoil in the eurozone has also given British assets greater appeal.

Legislation will be introduced to give parliaments five-year fixed terms, but the lower house could still be dissolved if 55 percent or more of lawmakers vote in favour.

The coalition government ends 13 years of Labour party rule under Tony Blair and then Gordon Brown.

Key figures in the new government include finance minister George Osborne, Vince Cable, the new business secretary, William Hague, in charge of foreign affairs, Liam Fox with the defence brief and Theresa May, the new home secretary.

Osborne has become the youngest finance minister in over a century and some in the finance industry have expressed scepticism about his credentials.


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