UK agrees more government spending cuts, tough battles loom

LONDON (REUTERS) - British ministries have agreed to spending cuts of 3.6 billion pounds (S$7.1 billion), the government said on Friday, leaving it less than two weeks to wring over two-thirds of its 11.5-billion-pound target from 10 remaining departments.

Britain's two-party coalition government is cutting spending to try to rein in a 114.2 billion pound deficit expected in the 2015/2016 budget in the face of calls from the International Monetary Fund to invest more now to avoid crimping a fragile recovery.

The bargaining process, as ministers try to defend their budgets, is likely to strain relations within the ruling Conservative party, which is already divided over Britain's membership in the European Union and gay marriage.

In a second update on the process, Chief Secretary to the Treasury Danny Alexander said the finance ministry had agreed on provisional spending cuts with six more ministries, adding up to 14 out of the 24 total, and that he was confident the finance ministry could find the further cuts it needed by the June 26 deadline.

"Settling over half of departments with two weeks to go shows how committed the whole of government is to dealing with the deficit," he said in a statement.

Mr Chris Leslie, the Labour party's shadow financial secretary to the treasury, said the government had been forced to seek more cuts because of failure to improve living standards and growth, leading to billions of pounds more borrowing.

"Far from balancing the books, the deficit is now set to be over 90 billion pounds in 2015," he said in a statement.

"This spending review must finally act to get our economy moving with a long-term plan for jobs and growth, as Labour and the IMF have urged."

The cuts announced on Friday amounted to a saving of 1.1 billion pounds, putting the government nearly a third of the way towards the overall 11.5 billion target.

One of the most sensitive departments facing cuts is the defence ministry.

General Peter Wall, the head of the army, told Sky News on Thursday that the country's chances of success in future wars could be "seriously damaged" by more cuts.

The police's counter-terrorism capabilities were exempted from the cuts, Mr Alexander said, after the interior minister called for that budget to be protected to allow the police to deal with incidents such as the killing of a British soldier in London last month.

The latest departments to have agreed to provisionally accept spending cuts of around 8 per cent included the Home Office (interior ministry), the Department for the Environment, Food and Rural affairs, the culture ministry, the Scotland Office, the Wales Office and the Law Officers Department.

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