Belfast Telegraph

Thursday 24 July 2014

No economic alternative, insists PM

Prime Minister David Cameron said there is no 'magic money tree' that would allow more borrowing and spending
Prime Minister David Cameron delivers his speech on the economy during a visit to precision grinding engineers Kinetic Landis Ltd in Keighley
Prime Minister David Cameron chats to Openreach apprentices as he tours a telephone exchange in Pudsey, West Yorkshire

David Cameron has insisted there is "no alternative" to the Government's deficit reduction strategy as he dismissed calls for a borrowing-fuelled capital spending drive.

The Prime Minister said critics appeared to believe there was a "magic money tree" that could avoid the need to continue taking tough decisions to deal with the UK's debts. But he was forced to deny a high-level split in the cabinet after Business Secretary Vince Cable questioned whether borrowing should be increased to fund infrastructure projects.

An article by the senior Liberal Democrat in which he suggested "the balance of risk" had changed between deficit reduction and growth had been approved by the Treasury, Mr Cameron said. It was seized on however by shadow chancellor Ed Balls as evidence of mounting internal dissent over a strategy that was proving a "total failure".

In a pre-Budget speech in West Yorkshire, a defiant Mr Cameron said: "There are some people who think we don't have to take all these tough decisions to deal with our debts. They say that our focus on deficit reduction is damaging growth. And what we need to do is to spend more and borrow more. It's as if they think there's some magic money tree. Well, let me tell you a plain truth: there isn't."

He went on: "The very moment when we're just getting some signs that we can turn our economy round and make our country a success is the very moment to hold firm to the path we have set. This month's Budget will be about sticking to the course, because there is no alternative that can secure our country's future."

The loss of the UK's prized AAA credit rating last month had been "the starkest possible reminder of the debt problem we face", he said. "If we don't deal with it, interest rates will rise, homes will be repossessed and businesses will go bust, and more and more taxpayers' money will be spent just paying off the interest on our debts."

In his New Statesman article, Mr Cable questioned whether the Government should "borrow more, at current very low interest rates, in order to finance more capital spending: building of schools and colleges; small road and rail projects; more prudential borrowing by councils for house-building".

He later played down the idea that his comments represented a shift in policy, telling the BBC: "We just need to pursue what I've often called Plan A-plus. That is financial discipline and getting down the deficit and at the same time pursuing growth. That's what we are doing and will continue to do."

Asked about Mr Cable's intervention, the Prime Minister said: "The article he wrote in the New Statesman was cleared and approved by the Treasury. He backs the measures we are taking on dealing with the budget deficit and also he is playing a very key role in making sure we deliver this agenda of backing the fastest growing areas of our economy that have real potential for the future. I work very closely with him in doing that."

Mr Balls said: "This defensive speech cannot mask the total failure of this Government's economic plan and growing divisions in a Cabinet which is now openly debating the need for a change of direction. But all David Cameron can offer to struggling families, pensioners and businesses is more of the same failing policies and a tax cut for millionaires. We need a bold and radical Budget to kick-start the economy and help people struggling with the rising cost of living."