David Cameron admitted yesterday that reducing Britain's deficit would take much longer than expected as he painted a gloomy backdrop for next week's Government statement on the health of the economy.
A "good news" announcement of help for up to 100,000 prospective home-buyers who are frozen out of the housing market was tempered with a sober speech by the Prime Minister.
Mr Cameron told the CBI's annual conference: "Getting debt under control is proving harder than anyone envisaged. High levels of public and private debt are proving to be a drag on growth, which in turn makes it more difficult to deal with those debts, but this also undermines further the case for adding to the national burden of debt with even more borrowing."
He dropped a clear hint that the independent Office for Budget Responsibility (OBR) will disclose next week that the structural deficit – the part not due to temporary factors such as the recession – has increased. The rise could be more than £10bn, in a big setback for the Chancellor George Osborne's strategy. "We are recovering from a debt crisis, not a traditional recession," Mr Cameron said.
Insisting the Government would not depart from its "Plan A", Mr Cameron said the eurozone debt crisis was having a "chilling effect" on the UK economy but denied he was blaming all "our ills" on the single currency. He said: "We had an emergency Budget last summer on our own terms, not this summer on the market's terms. We acted to prevent crisis while others who failed to do so are suffering emergency budgets, deeper austerity and political crisis."
Earlier, Mr Cameron and the Deputy Prime Minister Nick Clegg unveiled a housing strategy that ministers see as crucial to their political – and the country's – economic fortunes. They have been seeking a "real world" domestic policy to kickstart growth and improve the lives of hard-pressed people.
The most eye-catching element was a plan to require a deposit of only 5 per cent from some first-time buyers on new properties, instead of the normal 20 per cent. If the housing market suffered a severe downturn, the taxpayer could be responsible for part of the loss. But homebuyers would first lose their deposits and the loss to the Government would be shared with the bank.
Some banks and building societies complained they were bounced into agreeing to the mortgage scheme at the last minute and said the final details had still not been settled.
The 78-page housing blueprint includes a £400m plan to build up to 16,000 new homes by speeding up the use of "shovel-ready" construction sites where work has stalled. Up to 3,200 of the proposed new properties could be affordable homes and the initiative could support up to 32,000 jobs.
Mr Cameron said he wanted to make "the dream of home ownership" a reality for more people.Reuse content