G7 Summit: Clarke ssys G7 must cut pension and health costs

(First Edition)

KENNETH CLARKE, the Chancellor, yesterday exploited the World Economic Summit to drive home the message that his plans for a tighter-than-expected public spending round and possible tax increases were tough choices faced by most other Group of Seven countries.

After issuing a joint G7 finance ministers' report calling for new controls on the rising cost of public pensions and health care in the main industrial countries, Mr Clarke said the signal also applied to Britain. 'The message I'd like people to take back home is a political one, to understand that the UK shares its problems with every other developed country.'

The Chancellor said that 'all governments are having to tackle the same things and we have a deficit in our public finances which we are committed to dealing with'.

Strengthening John Major's hint of deeper public spending cuts earlier this week, Mr Clarke said the Government 'didn't believe in deficits in public finances' and professed himself 'quite happy' with the economic convergence criteria of the Maastricht Treaty.

The criteria, which are due to be debated at an EC finance ministers' meeting next Monday, call for budget deficits to be cut to 3 per cent of national output by late in the decade, a target that Britain is unlikely to be able to meet without further fiscal tightening.

If Mr Clarke took no action beyond the tax increases announced in Norman Lamont's Budget last March, Britain's budget deficit would fall to 3.75 per cent of GDP by 1997-98 from around 8 per cent today, including privatisation proceeds.