London: Britain's new coalition government will next Monday outline £6 billion (Dh32 billion-$8.75 billion) of spending cuts this year ahead of its first budget on June 22, Chancellor of the Exchequer, George Osborne, said yesterday.

Osborne, launching a fiscal watchdog to ensure the new Conservative-Liberal Democrat government is held to account on tackling the record budget deficit, said most of the 2010 savings would be used to reduce borrowing and some would be reallocated to support the job market.

"Deficit reduction and continuing to ensure the economic recovery is the most urgent issue facing Britain," Osborne told reporters. "We understand that and we need to get moving."

The previous Labour government had warned cutting spending this year could derail Britain's economic recovery but Osborne said he has the support of the Treasury and the Bank of England.

Britain's budget deficit is running at close to 12 per cent of GDP, a similar level to that of crisis-hit Greece, and the new government has said bringing it down is a priority to avoid another economic crisis.

"Greece is a reminder of what will happen if governments lack the will to act decisively and quickly," Osborne said.

The new independent Office for Budget Responsibility will be headed by former Bank of England policymaker Alan Budd and will publish fiscal forecasts and recommendations, under plans made by the Conservative Party before this month's election.

Safe hands

Attempts by Labour, in power for 13 years until May, to build confidence around its budgets and forecasts failed to impress most economists but Osborne hopes his creation will help to reassure debt-wary markets that Britain is in safe hands.

"I am the first Chancellor to remove the temptation to fiddle the figures by giving up control of the econ-omic and fiscal forecasts," Osborne said. "We need to fix the budget to fit the figures, not fix the figures to fit the budget."

Osborne, who became Britain's youngest chancellor of the exchequer or finance minister in 120 years last week, will deliver his emergency budget next month after the OBR has published its first forecasts.

While £6 billion of cuts will make only a small dent in the forecast £163 billion 2010-11 deficit, much steeper reduction is expected in years to come as the economy recovers, with government spending seen as the area most ripe for action.

"The main burden of deficit reduction should be done by reduced spending," said Liberal Democrat Chief Secretary to the Treasury David Laws.

"What we have not done is tied ourselves into an absolutely rigid formula."

The OBR will be expected to publish its forecasts at least twice a year around the time of the budget and pre-budget report, based on existing government policy at the time.

London (Bloomberg) A UK index of factory orders jumped to a 21-month high in May as the strengthening global economy and the weaker pound boosted export demand, the Confederation of British Industry said.

The gauge rose to minus 18 from minus 36 in April, the nation's biggest business lobby said in London yesterday. A measure of export orders rose to 3, the highest in more than two years, from minus 16. The CBI surveyed 509 companies from April 26 to May 12.

"The weak pound has made UK exports more attractive and manufacturers are benefiting from the pickup in world trade," Ian McCafferty, CBI chief economic adviser, said in a statement.

Strong rise

"This is helping the recovery in manufacturing and a slightly stronger rise in production is predicted in the coming months."

The economic recovery is gathering momentum as the country's new coalition government sets out plans to reduce a record budget deficit and avoid the sovereign debt crisis that's rattled markets in the euro region.