Labour accused Tory leader of betraying families after he warned of 'Greek-style interest rates' unless the deficit is tackled this year
David Cameron indicated yesterday that – if elected – he would press ahead with plans to start cutting Britain's £178bn fiscal deficit this year even if the economy dips back into recession.
Labour accused the Tory leader of betraying families after he warned of "Greek-style interest rates" unless the deficit is tackled this year.
Cameron issued his warning at the World Economic Forum in Davos when he was asked on Channel 4 News whether he would cut the deficit even if there is a severe contraction in the economy.
The Tory leader said: "We are saying that you must make a start in 2010 … The biggest threat to the British economy is not dealing with the deficit, it's failing to deal with the deficit. That is what could give us Greek-style interest rates and higher mortgage rates, tipping us back into recession and causing a real problem for the British economy."
Liam Byrne, the chief secretary to the Treasury, said: "Just as Britain's families and businesses have fought through from recession to recovery, Mr Cameron offers a betrayal in the mountains of Davos. Instead of backing Britain's recovery he dogmatically insists he'll slam on the brakes come what may – even if it forces a double-dip recession.
"He either doesn't understand economics or doesn't care about peoples' jobs."
Labour regards Cameron's remarks as highly significant. Alistair Darling has pledged to halve the fiscal deficit in four years, though this would not start until April 2011 so that relatively high public spending can be maintained to help Britain recover from the recession.
The Tories have long said they would start cutting the deficit this year. Labour believes the release of figures showing Britain is scraping out of recession highlight the importance of maintaining spending levels.
Cameron will today deliver an upbeat speech in Davos on Britain's economic prospects. In language which contrasts with his dire warnings back home of Britain's poor credit rating, Cameron will say that he hopes to become the "flag-waver" for British business as prime minister.
George Osborne, the shadow chancellor, today issues the Tories' most enthusiastic endorsement of "nudge" thinking. In a Guardian article, he says that a Tory government would only pay advertising agencies working in the public sector their full fee if their marketing campaigns lead to "behaviour change".
Osborne's article is written jointly with Richard Thaler, professor of economics at the University of Chicago and the joint author of Nudge, which is a philosophy that says people should be encouraged to change behaviour, rather than be compelled to by others.
Copyright Speakers Corner 2016