Tory spending cuts plans 'would be biggest mistake'

Joe Churcher,Daniel Bentley
Monday 25 January 2010 14:52
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Gordon Brown renewed hostilities with the Tories over the economy today, warning that Opposition plans for immediate spending cuts would be "the biggest mistake".

The Prime Minister said he was "confident" the UK was emerging from recession, ahead of official figures tomorrow which are expected to confirm a return to growth.

But he said there was international agreement that reducing spending too fast would put the "fragile" recovery at risk.

Mr Brown was responding to claims by Tory leader David Cameron that the Government was putting "naked political calculation" ahead of Britain's economic interest by failing to promise immediate public spending cuts.

He told reporters at his regular press conference: "I am confident that the UK economy is emerging from recession. But there are dangerous global forces... which mean that the world and the UK economy remain fragile.

"Policymakers around the UK and in the United Kingdom must remain vigilant. That is why we are all agreed around the world that we must reduce our deficits steadily, according to a plan, but that we must do nothing this year which would put recovery, growth and jobs at risk."

He said: "The biggest mistake we in Britain and individual countries could make would be to withdraw now from the supportive actions we need for growth and jobs."

As pre-general election skirmishes intensified, the Prime Minister accused Mr Cameron of being out of step with the rest of the world on economic policy.

The UK is borrowing around £178 billion to bridge the gap between what it spends and collects from tax and other revenues, and the Government has pledged to halve the record deficit within four years.

Earlier this month shadow chancellor George Osborne set out for the first time Tory plans to make in-year reductions in Labour's £707 billion spending plans for 2010/11, set out in December's Pre-Budget Report (PBR).

The Conservatives have criticised Chancellor Alistair Darling for announcing a 2% real-terms increase in state spending in the PBR, rather than finding savings to start reducing the record deficit.

But in a direct response to Mr Cameron, the Prime Minister said: "If you withdraw the stimulus too quickly, then you risk a period when you put the recovery at risk.

"There is no doubt that that's the view of the rest of the world. It is certainly my view and that's why we are stepping up our action against youth unemployment today."

A guarantee that every young person who has been unemployed for at least six months can access a job, training or work experience - with those who refuse losing benefits - also came into effect today.

"There is a consensus around business and around the rest of the country that if you withdraw this stimulus too quickly, then you risk jobs, you risk recovery, you risk small businesses and their very existence and you put services at risk as well.

"We have a tough deficit plan. It is a tough deficit plan. It is being implemented, it is being put into law but we must first of all ensure the recovery."

He said he agreed with Mr Darling that there would have to be a round of "tough, difficult and non-negotiable" spending cuts next year.

But he insisted they would be in "low-priority areas", with schools, children's centres, the police and the NHS protected.

New five-year plans would be announced for key public services, he said, as well as moves to create jobs in emerging industries as part of what Mr Brown has called the biggest "wave of social mobility" seen since the end of the Second World War.

Mr Brown said that at the next election "the central choice will be who offers the best prospects for future jobs and family prosperity".

"The biggest employment push for young people the country has ever seen reflects our determination to avoid jobless growth and achieve job-rich growth.

"Our plans will expand the middle classes, not squeeze them, by building a job-rich prosperity, not resigning the country to an age of austerity.

"This will be the driving purpose of the Government over the next period because I know this is the difference between success and failure for our country in the coming decades."

Asked about Goldmans Sachs's decision for its 100 UK partners to have their 2009 pay and bonuses capped at £1 million, the Prime Minister restated his call for an international tax on financial transactions.

"I think there is a very big danger that the banks want to return to what I would call the bad old ways," he said.

"There is a very big risk that if we don't take the action that is necessary, sometimes very controversial, that banks will relapse into what they were before, taking reckless risks at the expense of the customers and the rewards being unrelated to the risks that eventually have been met, not by the banks themselves but by the peoples of their country taking responsibility when the banks have failed."

He said his proposal of an international levy on financial transactions was "gathering support around the world".

"Given it would be unfair for one centre to be disadvantaged for taking the right action, while others benefit from that being more harsh on the taxational financing of banks, it is far better that there is global action to deal with this issue."

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