Associated Press Wire

Mar 18, 1:06 PM EDT

UK government offers giveaways in budget ahead of election


AP Photo
AP Photo/Kirsty Wigglesworth

Buy AP Photo Reprints
Latest Budget News
GOP-guided budget sets up battles between Congress and Obama

Multimedia
Obama's 2011 budget

LONDON (AP) -- Without ditching its austerity prescription for the U.K. economy, the Conservative-led government announced a series of mini-giveaways Wednesday that it hopes will bear dividends at what is expected to be the tightest general election in decades.

In his final budget statement ahead of the May 7 election, Treasury chief George Osborne focused his largesse on wannabe homebuyers, pensioners, drivers and frequenters of the British pub. The cost of the measures, budget figures showed, was more than offset by other steps such as reducing tax avoidance and raising a levy on banks.

And looking ahead, the austerity mantra that has been the centerpiece of the government's economic strategy since it was formed five years ago, looks set to remain - at least if the Conservative Party stays in power. Documents accompanying the budget indicate tough controls over spending for at least another four years, though they do suggest that austerity will conclude at the end of the decade.

"The sun is starting to shine and we are fixing the roof," Osborne told a packed House of Commons.

When Osborne took control of Britain's economic levers in 2010, he insisted that sorting out public finances was the primary objective. Following the global financial crisis of 2007-8, the U.K. economy sank into its deepest recession since World War II and a number of the country's largest financial institutions, such as Lloyds Bank and the Royal Bank of Scotland, required taxpayer help to stay afloat.

Government finances took a big dent and Osborne's solution, adopted by the junior partner in the governing coalition, the Liberal Democrats, was deep spending cuts and tax increases.

For the main opposition Labour Party, Osborne's strategy hobbled the U.K. economy for years and actually made the budget situation worse. It argues that too much of the burden of fixing the public finances was placed on the least well-off in society and that it worsened living standards for many.

"It's a recovery for the few from a government of the few," said Ed Miliband, Labour's leader. "For the first time since the 1920s, people are earning less at the end of a government than they were at the beginning."

The U.K. economy will likely be the main battleground in the election campaign and Osborne sought to nullify Labour's charge that the recovery is not felt by most people.

Citing independent forecasts prepared for the budget, Osborne said the U.K. economy is set to expand faster than anticipated this year despite downgrades to global growth. He said the Office for Budget Responsibility thinks the U.K. will grow 2.5 percent this year, up slightly from its last prediction of 2.4 percent. Growth is forecast to stay above 2 percent in subsequent years.

He also insisted public finances are on the mend and that the budget will be in surplus by 2018-19.

Opinion polls say the general election is too close to call, with the Conservatives neck-and-neck with Labour. No party is anticipated to achieve a majority in the election, which means deals with smaller parties will have to be sealed for a government to be formed.

Besides the Liberal Democrats, smaller parties including the UK Independence Party and the Scottish National Party are set to gain representation.

Osborne's sweeteners to voters included:

- Increasing the level that people start paying income tax to 11,000 pounds ($16,133) a year from 2016-17.

- No tax paid on the first 1,000 pounds ($1.4670) saved for those paying the standard rate of income tax.

- A plan to help first-time home buyers, whereby the government will contribute a pound to every four pounds saved for the purchase, up to 3,000 pounds.

- A penny off a pint of beer.

- An upcoming fuel duty frozen for another year.

- A review on the tax system governing inheritance.

Overall, it was, according to Capital Economics' chief U.K. economist Vicky Redwood a budget that balanced "fiscal prudence with election bribery."

----

Danica Kirka in London contributed to this story.

© 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.