U.K. Tightens Its Belts, Even the Queen's

Last Updated 9:09 a.m. ET

Britain's Treasury chief George Osborne has announced the toughest cuts to public spending in decades and new tax rises in an emergency budget aimed at sharply reducing the country's record debts.

Osborne said Tuesday his program "pays for the past and plans for the future."

Government borrowing is to be reduced from 10 percent of GDP to 1 percent within 5 years, by means of spending cuts, including a freeze on financial support to the Queen.

Osborne announced Tuesday that he would impose a levy on banks to raise £2 billion ($3 billion) a year, and cut most government departments' budgets by 25 percent.

The government is also hitting consumers with a rise in the broad-based tax on sales and services from 17.5 percent to 20 percent next year.

He said the government will make £30 billion per year ($44 billion) in cuts to spending by 2014-15.

Unusually, Osborne announced no increase in taxes on alcohol, tobacco and fuel, and he repealed a high tax on cider.

Osborne said Queen Elizabeth II had accepted a freeze on financial support from government under his plans, and the government will impose a two-year wage freeze on most civil servants.

Britain's Office for Budget Responsibility forecasts government borrowing will total £155 billion ($228 billion) in the current year.