Lib Dems turn on George Osborne over cuts

Ministers demand action on growth as IMF economist calls for Plan B

George Osborne is under mounting pressure to slow the pace of his spending cuts amid growing fears that Britain could be heading for a “triple-dip” recession.

Liberal Democrat cabinet ministers are worried that the Government is not doing enough to boost growth, and are privately pressing the Chancellor to speed up job-creating building projects in his March Budget.

The chief economist at the International Monetary Fund called for Britain’s planned spending cuts to be slowed – in effect for an economic Plan B.

City analysts expect figures published by the Office for National Statistics tomorrow to reveal the economy shrank during the final three months of last year, after a mini-boost from the Olympic Games. A second consecutive quarter of negative growth in the first three months of this year, made more likely by bad weather, would tip the country back into recession.

Simmering behind-the-scenes tensions between the two coalition parties over economic policy have surfaced with Nick Clegg saying: “Wherever we can we’ve got to mobilise more investment into productive capital because the economic evidence is overwhelming. It helps create jobs now; people go on to construction sites; it raises the productive capacity of the economy in the longer run.”

The Liberal Democrats are not calling for a Plan B, which would divide the Coalition on its central mission of tackling the deficit.

But in an interview with Parliament’s The House magazine published today, the Deputy Prime Minister admitted the Coalition made a mistake when it cut capital spending soon after it was formed in 2010. He said: “I think we’ve all realised that ... in order to foster a recovery you need to try and mobilise as much public and private capital into infrastructure as possible. So what we’ve done since then, in effect, is come up with various surrogate ways in getting working capital into infrastructure.” Mr Clegg cited the Treasury’s £40bn of guarantees for infrastructure projects and £10bn for house building.

The Liberal Democrat leader said the Government should “put money back into the pockets of people on middle and low incomes” so they could keep the economic wheels turning by spending on the high street.

Liberal Democrat ministers including Vince Cable, the Business Secretary, are also fighting to protect building projects in a government-wide spending review for 2015-16 now under way. Mr Osborne, meanwhile, is seeking an extra £10bn of cuts.

The IMF’s chief economist, Olivier Blanchard, said yesterday that the continued weakness of the UK economy justified a change of fiscal course. “Slower fiscal consolidation in some form may well be appropriate,” he told BBC Radio 4’s Today programme.

Last May, the IMF, in its annual review of UK finances, recommended that the Coalition should ease up on its austerity measures to support growth if the economy continued to under-perform. “Our early advice is still there,” said Mr Blanchard.

“We’ve never been passionate about austerity. From the beginning we have always emphasised that fiscal consolidation should be slow and steady.

“We said that if things look bad at the beginning of 2013 – which they do – then there should be a reassessment of fiscal policy. We still believe that.”

Mr Blanchard said, “You have a Budget coming in March. We think this is a good time to take stock and see whether some adjustment could be made,” he said.

City analysts have speculated that Britain could lose its triple-A credit rating, which is already on a negative outlook with all three of the main ratings agencies, after public borrowing rose in December.

Mr Osborne, asked about Mr Blanchard’s call at the World Economic Forum in Davos, said that he would be sticking with his existing spending cuts schedule. “I have been prepared to let the automatic stabilisers operate in the UK but I don’t think it’s right to abandon a credible deficit-reduction plan,” he said. “That credibility is very hard-won and very easily lost. It would be a huge mistake to put that at risk”.

The Chancellor received a pre-release yesterday of the official figures for the final quarter of 2013. Asked in Davos about how he would describe the present condition of the UK economy Mr Osborne said: “We are walking a difficult road, but we are heading in the right direction”. He added: “We’re not about to bring that [cuts] programme to an end. We’ve set out a programme of deficit reduction until 2017. Britain still has a high budget deficit. I wish it were not the case. This new Government is having to deal with this.”

Asked whether his current fiscal plans are working, the Chancellor said: “I would say the rebalancing is taking place.”

Treasury sources suggested that Mr Blanchard did not speak for the IMF as an institution. “It’s no surprise coming from Mr Blanchard,” said one a senior source. “Everyone knows there’s a debate in the IMF about this and he’s at one end of it”. The source also pointed out that the IMF called for the policy to be reappraised at the beginning of 2013, but there has been no hard economic data yet showing how this economy has been performing this year.

Nevertheless, other prominent economists backed Mr Blanchard’s call for a change of course. Adam Posen, who left the Bank of England’s Monetary Policy Committee last year and was also in Davos today, said: “I cannot add anything to Olivier’s call, except to say, ‘Right’.”

The shadow Chancellor, Ed Balls, said: “David Cameron and George Osborne must finally heed the IMF’s advice. They have repeatedly warned that a change of course would be needed in Britain if the economy turns out worse than expected. The IMF is now clearly losing patience.

“The longer the Government clings on to its failing plan, the more long-term damage they will do to our economy. David Cameron and George Osborne must now put political pride aside and put the national economic interest first.”

I just want the best: Clegg may send son to private school

Nick Clegg has suggested that he and his wife may send their son to a private secondary school this year.

The admission came during the Deputy Prime Minister's weekly phone-in show on LBC Radio. He said his son, Antonio, could be educated privately when he leaves his state primary in Putney, south London, this summer.

"Like all parents who are sending their children to secondary school in London... there is huge competition for places," said Mr Clegg. "I just want the best for my child and that's exactly what I think most people listening to this programme want for their children..."

Mr Clegg has in the past described the "corrosive" social divisions caused by private education.

Prime Minister David Cameron this week said he plans to keep his daughter Nancy at her state primary school.

Sam Masters

Arts and Entertainment
arts + entsWith one of the best comic roles around, it's no wonder she rarely bothers with films
News
people
News
i100
News
Davis says: 'My career has been about filling a niche - there were fewer short actors and fewer roles – but now I'm being offered all kinds of things'
PeopleWarwick Davis on Ricky Gervais, Harry Potter and his perfect role
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Voices
A Russian hunter at the Medved bear-hunting lodge in Siberia
Save the tigerWildlife charities turn to those who kill animals to help save them
Sport
Frank Lampard will pass Billy Wright and equal Bobby Charton’s caps tally of 106 caps against
sportFormer Chelsea midfielder in Etihad stopgap before New York contract
News
i100
Sport
Usain Bolt of Jamaica smiles and shakes hands with a competitor after Jamaica won their first heat in the men's 4x100m relay
sport
News
Chancellor George Osborne, along with the Prime Minister, have been 'complacently claiming the economy is now fixed', according to shadow Chancellor Ed Balls
i100... which is awkward, because he is their boss, after all
Arts and Entertainment
The first film introduced Daniel Radcliffe to our screens, pictured here as he prepares to board the train to Hogwarts for the first time.
booksHow reading Harry Potter helps children grow up to be gay-friendly
Life and Style
A small bag of the drug Ecstasy
Health
News
i100
Life and Style
Floral-print swim shorts, £26, by Topman, topman.com; sunglasses, £215, by Paul Smith, mpaulsmith.co.uk
FashionBag yourself the perfect pair
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Commercial Property Solicitor - Bristol

Highly Attractive Package: Austen Lloyd: A VERY HIGH QUALITY FIRM A high qual...

(Senior) IT Support Engineer - 1st-3rd Line Support

£40000 per annum: Ashdown Group: A successful IT service provider that has bee...

Wind Farm Civil Design Engineer

£55000 - £65000 Per Annum: The Green Recruitment Company: The Green Recruitmen...

Principal Marine Mechanical Engineer

£60000 - £70000 Per Annum: The Green Recruitment Company: The Green Recruitmen...

Day In a Page

Save the Tiger: Meet the hunters tasked with protecting Russia's rare Amur tiger

Hunters protect Russia's rare Amur tiger

In an unusual move, wildlife charities have enlisted those who kill animals to help save them. Oliver Poole travels to Siberia to investigate
Transfers: How has your club fared in summer sales?

How has your club fared in summer sales?

Who have bagged the bargain buys and who have landed the giant turkeys
Warwick Davis: The British actor on Ricky Gervais, how the Harry Potter set became his office, and why he'd like to play a spy

'I'm a realist; I know how hard this business is'

Warwick Davis on Ricky Gervais, Harry Potter and his perfect role
The best swim shorts for men: Bag yourself the perfect pair and make a splash this summer

The best swim shorts for men

Bag yourself the perfect pair and make a splash this summer
Has Ukip’s Glastonbury branch really been possessed by the devil?

Has Ukip’s Glastonbury branch really been possessed by the devil?

Meet the couple blamed for bringing Lucifer into local politics
Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup