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Osborne Told to Stop Using Euro Zone Alibi

George Parker
Monday, 11 Jun 2012 | 2:46 AM ET

George Osborne has been warned by Tory MPs not to use the euro zone crisis as “an alibi” for Britain’s poor economic performance and to step up supply-side reforms to promote growth.

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The chancellor claimed on Sunday that Britain’s recovery was being “killed off by the crisis on our doorstep”, a message he is expected to repeat on Thursday in his Mansion House speech.

But a number of Conservative MPs have questioned Mr. Osborne’s critique, arguing that while huge uncertainty in the euro zone is weighing down on Britain, there is more that can be done at home.

David Ruffley, a Tory member of the Commons Treasury committee, said: “The UK government must not use this an alibi. Action is clearly needed now: we must find a way of attracting capital from all over the world into UK infrastructure bonds.”

David Davis, a former Tory leadership challenger, has long argued that lower taxes and lower regulatory burdens would help to offset the drag of the euro zne.

Referring to Mr. Osborne’s claim in the Sunday Telegraph at the crisis in Greece, Spain and elsewhere was “killing” the UK recovery, Mr. Davis said: “It’s not only that. It’s a combination of that and the need for a more aggressive growth strategy here.”

The strongest criticism came from Douglas Carswell, a leading euroskeptic, who said on his blog: “It is not the euro zone crisis that we should blame for our awful economic performance but the almost total absence of domestic economic reform coupled with the Treasury’s absurd belief that monetary stimulus can engineer growth.

“Switzerland, which does more than four times more trade with the euro zone than we manage, is growing,” he added. “The idea that this is all the fault of the euro zone is demonstrably wrong.”

With Britain in a double-dip recession, Mr. Osborne is keen to apportion the blame to weak leadership and indecision on the continent, rather than any shortcomings in the government’s own strategy.

But some Tory MPs want the coalition to cut business taxes more aggressively and sweep away employment regulation. Mr. Ruffley has called for a much more ambitious move to attract sovereign wealth fund investment into the UK.

Meanwhile David Cameron, the prime minister, and Nick Clegg, his deputy, have told the Treasury to use the strength of its balance sheet to underwrite housing and infrastructure projects.

The political blame game over Britain’s sluggish economic performance will be one of the defining arguments in the run-up to the next election, with Mr. Osborne apparently determined to claim it is “made in Europe”.

Meanwhile Labour wants to wash its hands of responsibility for the downturn — many voters still blame Gordon Brown’s government for the country’s economic plight — and to pin responsibility on Mr. Osborne.

“It’s deeply complacent and out of touch for George Osborne to blame Europe for a double-dip recession made in Downing Street,” said Ed Balls, shadow chancellor.

“Despite the euro zone crisis, Germany, France and the euro area as whole have so far avoided recession while Britain’s recovery was choked off in the autumn of 2010. Our domestic economy shrank last year and without exports to Europe and the rest of the world we would have been in recession over a year ago.”

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