Cameron set for new Battle of Britain

After Greece, Spain and Ireland, Britain now finds itself in the meat grinder, confronting budget decisions that will chop spending in defence, education and welfare and threaten tens of thousands of jobs.

Inheriting a public spending deficit this year of an eye-popping £154 billion ($324 billion), the new conservative-centrist coalition will on Thursday (NZT) set out details of its plans to narrow the shortfall by £83 billion over the next four years in the greatest austerity drive since World War II.

Prime Minister David Cameron has exploited the mood stoked by the 70th anniversary of the Battle of Britain and the looming anniversary of the Blitz to appeal for unity. "I wish there was another way. I wish there was an easier way. But I have to tell you: there is no other responsible way," Cameron told a party conference in Birmingham. "Let's pull together. Let's work together in the national interest."

Gloom, anxiety and intense debate have accompanied the runup to the October 20 spending review by George Osborne, Cameron's Finance Minister.

Many government departments will see cuts averaging 25 per cent over the next four years.

If, as Cameron has warned, everyone will feel pain, the big question is whether the pain will be shared fairly. Tensions are high among the Liberal Democrats, who teamed up with the Tories after the May 6 elections, and now fear cuts that are driven by ideology more than pragmatism.

Businesses, trade unions and the opposition Labour Party have warned that excessive zeal could undermine Britain's recovery from the crisis that shook its economy in 2008. Even so, some sacred cows have already been lined up at the abattoir, some of them cherished by the middle classes who brought the coalition to power after 13 years of Labour government.

They include the holy principle of universal benefits: child benefit will be scrapped for more than a million households where there is an annual income of more than £44,000 ($92,800), ending a payment-for-all tradition dating from the founding of the welfare state in 1946.

Defence, another traditionally protected area, will also face Osborne's axe. The Defence Ministry has been fighting to limit the cuts to around 10 per cent annually, half of what was planned.

Even so, this could still reduce Army numbers by a fifth and threaten programmes to build two aircraft carriers and maintain orders for warplanes to attack its ageing Tornado jets, according to independent analysis.

US Defence Secretary Robert Gates, heading to a Nato meeting in Brussels on Thursday, said he was worried by what such cuts would mean for burden-sharing in Afghanistan and military vigilance elsewhere.

"My worry is that the more our allies cut their capabilities, the more people will look to the United States to cover whatever gaps are created. At a time when we are facing stringencies of our own, that's a concern for me," he said, according to a Pentagon transcript.

In education, the Government has been mulling proposals to scrap the ceiling of £3290 ($6941) as the maximum universities can charge for annual tuition fees. The scheme would be "the final nail in the coffin for affordable higher education," according to the University and College Union, which represents lecturers and professors. Hundreds of scientists protested outside the Finance Ministry last weekend, chanting "Hey, Osborne! Leave our geeks alone!", to the tune of the Pink Floyd song The Wall, appealing for science budgets to be spared.

Cameron's pitch to the public is that belt-tightening will be a sharp shock but a short one.

"I promise you that if we pull together to deal with these debts today, then just a few years down the line the rewards will be felt by everyone," he told the party conference on October 6.

But if the experience of Europe's other spendthrifts is a guide, optimism may be ill founded.

In Greece, struggling with a debt of around €300 billion ($550 billion), unemployment has surged to 12 per cent of the workforce from 9.6 per cent in the past year, with worse to come. In Spain, one in five has no job.

The ratings agency, Moody's, has downgraded the country's credit status, from "Aaa" to "Aa1", meaning that it will have to spend more to secure foreign loans, even though the Government has cut public-sector by 5 per cent and plans to raise the retirement age from 65 to 67. Ireland, meanwhile, has been stunned by the escalating cost of bailing out the Anglo Irish Bank, which went on a mad property-lending spree in the last decade.

For a country with a population of 4.4 million, the rescue may cost as much as €34 billion ($62.3 billion), helping to push the public deficit to 32 per cent of gross domestic product this year - a record.

Irish emigration, which had reversed during the boom years of the "Celtic Tiger" economy, has become an exodus once more: a trade fair in Dublin this month that offered young Irish people the chance of jobs in New Zealand, Australia and Canada was swamped by 5000 people.