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UPDATE 1-UK's Osborne says won't change pace of cuts

Published 03/20/2011, 06:19 AM
Updated 03/20/2011, 06:20 AM

* Finance Minister says to stick to cuts plan

* UK budget to use bank tax to fund job training

* Ministers says will do more to ease tax on low paid

(Adds details from paragraph 4)

By Peter Griffiths

LONDON, March 20 (Reuters) - Britain would risk its economic stability if it watered down a programme of tax rises and public spending cuts aimed at reducing a record budget deficit, finance minister George Osborne said on Sunday.

"That would be a huge mistake for this country," he said in an interview with the BBC.

"We would lose economic stability and we would be back in the mess of wondering what is going to happen tomorrow to Britain's credit rating. It is not going to happen.

"I can say in the Budget later this week I am not going to be asking for more tax increases or more spending cuts," Osborne added.

The government has staked its reputation on eliminating the budget deficit, which has swollen to 10 percent of GDP, by the time of the next election in 2015. The fate of both coalition partners -- Conservatives and Liberal Democrats -- also rests on what state the economy is in four years down the line.

TOO DEEP, TOO QUICKLY

Opposition politicians accuse the government of jeopardising the recovery by cutting the deficit too far and too fast, but the government cites voices of international support -- and calmer bond markets -- as reason enough to stay the course.

The independent Office for Budget Responsbility is likely to downgrade its 2.1 percent 2011 growth forecast, which could affect borrowing slightly in coming years and will encourage critics of the government's planned spending cuts.

The cuts pencilled in to an emergency budget last June will start to bite in earnest from April, the start of the new fiscal year. Public sector job cuts are unavoidable and are estimated to total more than 300,000 over the next four years

Ministers said on Saturday that Wednesday's budget would exempt more workers from income tax and use bank levy money to help young people train for jobs.

Chief Secretary to the Treasury Danny Alexander, in an article for The Observer newspaper, said the Conservative-Liberal Democrat coalition would "set out further real terms progress towards our goal of taking anyone earning less than 10,000 pounds out of tax altogether".

Osborne indicated there could also be help for motorists struggling with rising petrol prices.

"I can't promise things the country can't afford, but I've listened to families and I will do what I can to help," he said.

The government will also unveil the results of its cross-departmental growth review alongside the budget, with an overhaul of planning rules, red tape and regulation and tax simplification expected to form the bulk of measures. ($1=.6192 Pound) (Additional reporting by Matt Falloon, editing by Jodie Ginsberg and Alexander Smith)

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