Britain's finance minister vows no retreat on deficit plan

3rd October 2011, Comments 0 comments

British finance minister George Osborne strongly defended his deficit reduction plan on Monday, while insisting the government was taking action to boost sluggish economic growth.

The chancellor of the exchequer rejected calls to loosen his programme of spending cuts to eliminate the budget deficit by 2015, insisting that borrowing any more money would be a gamble with Britain's fiscal credibility.

In a speech to his Conservative party conference, Osborne ruled out any unfunded tax cuts or an increase in public spending, saying: "We are in a debt crisis. It's not like a normal recovery -- you can't borrow your way out of debt."

But in a bid to soften the blow of the governing coalition's austerity measures, Osborne also announced a freeze on local authority taxes for a second year, a measure costing 805 million pounds (930 million euros, $1.25 billion).

"I don't pretend to you that these are not difficult days, and that there are not difficult days ahead, but together we will ride out the storm," Osborne told delegates gathered in Manchester, northwest England.

He attacked the record of the previous Labour government which left a legacy of debt, and launched an unusually strong broadside against banks who had to be bailed out in the financial crisis, saying they had "let down" their customers and shareholders.

"The banks and those regulating them believed that the bubble would never stop growing, that markets were always self-correcting, that greed was always good, that their ponzi schemes would never collapse, and that none of their debts would ever turn bad," Osborne said.

Britain's deficit reduction programme is one of the most radical in the European Union and as the economy continues to falter, he has faced increasing criticism from the opposition Labour party that it is choking off growth.

In a major boost for the plan, however, the rating agency Standard and Poor's announced as Osborne was speaking that it was confirming Britain's top "AAA" credit rating and maintaining a stable outlook.

This was despite predicting growth rates of around 1.8 percent on average in 2011-2014, lower than the 2.5 percent forecast by the Office for Budget Responsibility, the government fiscal watchdog.

Labour has led criticism of the government's economic plan, but senior Conservative backbencher Andrew Tyrie joined the chorus at the weekend, warning that ministers lacked a "coherent and credible" strategy for growth.

Prime Minister David Cameron, the Conservative leader, insisted on Sunday that the government was "firing up the engines of the British economy", including through measures to boost house building.

And on Monday Osborne announced a number of further measures that aides said was proof of the government's economic activism.

This included a plan for "credit easing" to help small businesses struggling for funds, where the government would sell government debt and use the money -- potentially billions of pounds -- to buy corporate bonds.

Osborne also announced plans to make it harder for people to go to employment tribunals -- another boost for small businesses -- and elsewhere, to boost mobile phone coverage, house building and scientific research.

Business groups welcomed the measures, although the CBI business lobby group warned that more still was needed on growth.

"George Osborne is right to highlight the importance of deficit reduction and the risks of unsettling money markets by any shift from Plan A," said CBI director general John Cridland.

"But in the coming weeks, the chancellor must unveil further plans for boosting growth."

© 2011 AFP

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