Huhne hints at public spending adjustments if economy worsens

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Indy Politics

The Government may yet scale back its planned public spending cuts if economic conditions worsen, a Cabinet minister suggested today.

Chris Huhne, the Liberal Democrat Energy Secretary, said the coalition might have to "tack about" if circumstances altered before the Budget next spring.

There are fears among some that Britain is still susceptible to a double-dip recession and that the £83 billion cuts programme to be outlined in the comprehensive spending review on October 20 could make matters worse.

Prime Minister David Cameron and Chancellor George Osborne used their keynote speeches to the Conservative Party conference this week to insist that there was no responsible alternative to their plans.

Whitehall departments are braced for cuts averaging 25% over the next four years.

In an interview with The Daily Telegraph today, Mr Huhne said Mr Osborne's emergency budget heralding a massive shift in fiscal policy from the former Labour government was "absolutely right".

But he also claimed that the figures could be amended if global conditions deteriorated, saying he was not "lashed to the mast with a particular set of numbers".

"I've never known one Treasury Red Book to be exactly like the last one. There is always a change," he said.

"It is a bit like setting sail. If the wind changes, you have to tack about to get to (your destination).

"Global growth could be either higher or lower. We just don't know, and it's not sensible, outside the Budget period, for governments to make speculations about what is going to happen.

"The right time to look at that Budget judgment is when we come up to the Budget in the spring. The key thing then is to look at things in the round and remember the overall objective is to stabilise and begin to reduce the public debt to GDP ratio."

A double-dip recession was "not impossible" although he did not consider it "likely", he added.

Mr Huhne also gave voice to Lib Dem concern about the Government's plan to introduce a tax break for married couples.

The idea, contained within the coalition agreement but with provision for Lib Dem MPs to abstain, was resurrected by Mr Cameron this week as he came under fire for abolishing child benefit for higher earners.

The proposed transferable tax allowance, originally only for basic rate taxpayers, may now even be extended to those who pay 40%.

Mr Huhne said: "I am very sceptical. (As with) all other issues, I'm quite happy to be open-minded and talk it through.

"But in the current circumstances, when we are very constrained in terms of tax breaks, then I think we need to make sure that what we're doing is real value for money and not flag waving.

"If it is just flag waving, then frankly it's probably not something that the Government ought to be doing."

A spokesman for Mr Huhne said today: "Chris Huhne was crystal clear that he stands full square behind the Chancellor's Emergency Budget and that tackling the record deficit inherited by this Government is unavoidable.

"He believes that unless the nation's debt is dealt with and spending is reduced, that we run the real risk of the recovery coming to an end."

Mr Osborne, in Washington for the International Monetary Fund conference, declined to say whether he had a plan B for the deficit in case there is an economic downturn.

But he stressed that the expected 600,000 public sector job losses would be "staggered over four years... it does not come into effect overnight".

Speaking on the fringes of the IMF conference last night, the Chancellor said the coalition's plans were "very credible" and that the IMF was "pretty complimentary to me in private about our plans... There has been no discussion of any concerns about the pace of consolidation."

Mr Osborne also indicated he would not oppose the Bank of England if its monetary policy committee wanted to increase its £200 billion quantitative easing programme.

"I regard the monetary policy committee as independent. If it makes judgments, I would want to follow those judgments," he said.