U.K.’s first coalition government since 1945 sketches out goals

LONDON — Britain’s first coalition government since 1945 unveiled its ministerial team on Wednesday and said it would speed up efforts to cut the country’s budget deficit as it emerges from a deep recession.

New Prime Minister David Cameron’s Conservatives struck a coalition deal with the third-placed Liberal Democrats that aims to overcome their ideological differences, but which critics say could lead to instability.

"This is going to be hard and difficult work. A coalition will throw up all sorts of challenges," Mr. Cameron said in his first speech as leader. "But I believe together we can provide that strong and stable government that our country needs."

The agreement, reached early on Wednesday five days after an inconclusive election, ended 13 years of rule by the centre-left Labour Party under Tony Blair and his successor Gordon Brown.

The coalition must cut a budget deficit running at more than 11% of GDP. It is expected to adopt Conservative plans to cut 6 billion pounds of spending this financial year, earlier than the Liberal Democrats wanted.

"There is going to be a significant acceleration in the reduction of the structural budget deficit," new finance minister George Osborne told reporters. "We are going to undertake long-term structural reforms of the banking system, of education and of welfare."

Markets welcomed the agreement, hopeful a government led by the centre-right Conservatives will take swift action to cut the country’s debts. Gilt futures jumped and sterling enjoyed a strong performance overnight, losing some ground later to trade broadly steady against the dollar.

The Conservatives are traditionally seen as hawkish on defence, and stocks in the sector were up 2.35% on the FTSE 350 index.

The coalition will have to prove that it has the strength and unity to agree big economic decisions, analysts said.

"Markets might still be nervous, because even though the uncertainty is resolved, coalition governments have more mouths, and markets don’t like feeding people," said Mark Wickham-Jones, politics professor at Bristol University in southwest England.

Mr. Cameron and Liberal Democrat leader Nick Clegg, the new deputy prime minister, were due to speak at 1315 GMT.

Former Conservative deputy leader William Hague is the new foreign secretary and ex-finance minister Ken Clarke will run the justice department.

Other key appointments include Conservative Theresa May as interior minister and Conservative Liam Fox as defence secretary. Lib Dem Vince Cable, a former economist, is the new business secretary, while fellow Lib Dem David Laws will take up the post of chief secretary to the treasury, helping to set departmental budgets.

The Lib Dems were celebrating after decades spent in the shadow of Labour and the Conservatives.

"There will of course be problems, there will of course be glitches. But I will always do my best to prove new politics isn’t just possible, it is also better," Mr. Clegg told reporters.

Lib Dem politician David Laws, one of the key negotiators during the coalition talks, said the agreement balanced the need for cuts with plans to protect the economic recovery.

Mr. Cameron, a 43-year-old former public relations executive, took over as prime minister after Mr. Brown admitted defeat in efforts to broker a deal with the Lib Dems. He is Britain’s youngest prime minister in almost 200 years.

Conservative politicians took to the airwaves on Wednesday morning to highlight their new good ties with the Lib Dems.

Mr. Hague said there were no big differences among the coalition on Afghanistan, where Britain is fighting an unpopular war.

He also said neither side favoured handing more powers to the European Union. The EU was seen as a stumbling block to a deal between the pro-EU Lib Dems and the anti-EU Conservatives.

"All British governments sometimes face difficulties over European policy, but given the discussions we have had and the agreement that I have just outlined, we certainly don’t start off with it as a difficulty," Mr. Hague told the BBC.

The Conservatives are parliament’s largest party after last week’s election but fell 20 seats short of an outright majority. With the Lib Dems, they will have a majority of 76 seats.