The British Prime Minister David Cameron defended the coalition government’s austerity plans on Wednesday telling delegates at the Conservative party’s annual conference in Manchester: “Our plan is right, and our plan will work.”
Admitting the British people couldn’t “see it or feel it yet” Cameron insisted the government was building a new economy.
“It’s like building a house. The most important part is the part you can’t see – the foundations that make it stable. Slowly, but surely, we’re laying the foundations for a better future. But this is the crucial point: it will only work if we stick with it,” he said.
In a speech light on new policy announcements but heavy on the theme of leadership the prime minister argued that borrowing more would lead to higher interest rates, less economic confidence and the threat of higher taxes in the future.
“The only way out of a debt crisis is to deal with your debts. That’s why households are paying down their credit card and store card bills. It means banks getting their books in order. And it means governments – all over the world - cutting spending and living within their means,” the prime minister added.
Telling the British people that half the world was booming he urged: “Let’s go and sell to them.”
“There’s so much that’s great about our country. We don’t have to accept that success in this century automatically belongs to someone else. We just have to remember the origin of our achievements: the people of Britain, taking a lead, he added.
But the prime minister admitted the threat to the world economy, and to Britain as a result, was as serious now as it was at the start of the financial crisis in 2008.
“The euro zone is in crisis, the French and German economies have slowed to a standstill; even mighty America is being questioned about her debts,” he said.
“It is an anxious time. Prices and bills keep going up – petrol, the weekly shop, electricity. On the news, it’s job losses, cutbacks, closures.”
However, Cameron argued that honesty over the economy was the only solution to Britain’s economic problems adding that this was “no normal recession”.
“It was caused by too much borrowing, by individuals, businesses, banks, and most of all, governments. When you’re in a debt crisis, some of the normal things that government can do, to deal with a normal recession, like borrowing to cut taxes or increase spending - these things won’t work because they lead to more debt, which would make the crisis worse,” he said.
The prime minister’s speech however, came on the same day that the International Monetary Fund (IMF) warned a second global recession in 2012 could not be ruled out and urged Britain, France and Germany to consider altering fiscal policy, arguing they should consider borrowing more money for government spending projects while interest rates remain at historically low levels.
Adding to the coalition government’s woes was the publication of revised UK economic growth figures from the Office of National Statistics (ONS), which showed Gross Domestic Product (GDP) growth halved to 0.1 percent in the second quarter of 2011.
In response the prime minister made a direct appeal for businesses to work with the government, promising them the government would cut red tape and make it easier for them to expand and grow.
“If you want skilled employees, we’ll provide the funding, we’ll cut the red tape. But you’ve got to show more leadership and give us the apprenticeships we need,” he added.
He also attacked the previous Labour government for wasting billions of pounds of public money, calling the coalition government’s deficit reduction plan “one big bail out of the last Labour government”.
“The new economy we’re building must work for everyone. You know the real tragedy of New Labour’s economy? Not just that it was unsustainable, unbalanced, overwhelmed with debt, but that it left so many behind,” he continued.
And he attacked the European Union for not working properly blaming Europe for its “pointless new regulations”.
“Europe has to wake up, and the EU growth plan we’ve published, backed by eight countries, which I want us to push at every meeting, every council, every summit, is the alarm call that Brussels needs,” he said.
Earlier in the day the opposition Labour party’s finance spokesman, Ed Balls, called for the prime minister to pull back from the public spending cuts in response to the ONS revised GDP growth figures.
"David Cameron and George Osborne urgently need to realise that spending cuts and tax rises which have gone too far and too fast have hit consumer confidence, killed the recovery and pushed up unemployment. This will just make it harder and harder to get the deficit down, and the government is already set to borrow £46 billion more because of slower growth and higher unemployment.
"As today's figures show families struggling with higher food and energy prices, rising unemployment and the VAT rise are already struggling to get by and are cutting back. They don't need an out of touch Prime Minister lecturing them about paying off their credit cards,” he said.