Prime Minister Gordon Brown strongly reiterated Government’s commitment to building a third runway at Heathrow airport, Crossrail and a programme of new nuclear power plants at the CBI dinner last night.
In an eloquent, passionate speech Brown used the event to justify a programme of public spending as the way out of a banking led recession and was a response to IMF and CBI demands to cut Britain’s budget deficit and just ahead of news from Standard & Poors that it expected government debt to approach 100% of GDP in the medium term.
“Every problem of the last 60 years has been an inflation-led problem. This is not an inflation-led recession ….and it is not a debt problem. UK debt is lower than Germany for example. This is a global banking failure. What we have had to deal with is a power cut through the system,” he said. “The cure is to have growth in the economy.”
“There are $7trillion of resources being held by the banks “just in case”. It falls on us when the markets fail and the banks collapse to stimulate the economy.
“We have a 10 year plan to deal with the public deficit; we are ready to sell off a substantial number of assets and are demanding efficiencies in the public sector.
“We have made the controversial decision to go ahead with the Heathrow runway, we have changed the planning system so we can move forward (on major projects). We have made the decision to go ahead with a nuclear power programme that we know is necessary to ensure (power) supplies, with all the parties against us. And we are going ahead with infrastructure including Crossrail.”
Brown indicated that to cut public spending now would exacerbate the crisis, something he had pointed out in Parliament earlier when he claimed at Prime Minister’s Questions that he could not call an immediate General Electon in the wake of the MPs expenses scandal because it would bring ‘chaos’ to the economy.
“What would cause chaos is if a Conservative government were elected and caused public spending cuts,” he said – not sounding too confident of his own chances but quite clear on the pivotal role of public spending in any recovery strategy.
The IMF yesterday praised the government for its “bold and wide ranging” response to the financial crisis but wanted faster action to restore public finances to health once recovery was established.
“The sharp increase in public sector borrowing and contingent government liabilities, together with continued financial sector fragility, are significant vulnerabilities. In these circumstances, a severe shock has the potential to disrupt domestic and external stability,” the IMF said.
The CBI meanwhile urged Government to cut the defecit – expected by the Treasury to hit £175bn this year. “The use of heroic growth assumptions, together with a timetable extended to 2018, amounted to a serious failure to address the deficit in a way that gives confidence to buyers of our debt,” said CBI president Martin Broughton.
Meanwhile Standard & Poors this morning revised its outlook for the UK from stable to negative though the AAA long term and A-1+ short term sovereign credit ratings were affirmed. The ratings agency predicted that government debt burden could approach 100% of GDP in the medium term.
“The rating could be lowered if we conclude that, following the election, the next government’s fiscal consolidation plans are unlikely to put the UK debt burden on a secure downward trajectory over the medium term,” said credit analyst David Beers. “Conversely the outlook could be revised back to stable if comprehensive measures are implemented to place the public finances on a stable footing or if fiscal outturns are more benign than we currently anticipate.”
RBS chief economist Nigel Goddard predicted long term interest rates would head higher as the expected cost of future government borrowing increases.
“Every problem of the last 60 years has been an inflation-led problem. This is not an inflation-led recession ….and it is not a debt problem. UK debt is lower than Germany for example. This is a global banking failure. What we have had to deal with is a power cut through the system,” he said. “The cure is to have growth in the economy.”
“There are $7trillion of resources being held by the banks “just in case”. It falls on us when the markets fail and the banks collapse to stimulate the economy.
“We have a 10 year plan to deal with the public deficit; we are ready to sell off a substantial number of assets and are demanding efficiencies in the public sector.
“We have made the controversial decision to go ahead with the Heathrow runway, we have changed the planning system so we can move forward (on major projects). We have made the decision to go ahead with a nuclear power programme that we know is necessary to ensure (power) supplies, with all the parties against us. And we are going ahead with infrastructure including Crossrail.”
Brown indicated that to cut public spending now would exacerbate the crisis, something he had pointed out in Parliament earlier when he claimed at Prime Minister’s Questions that he could not call an immediate General Electon in the wake of the MPs expenses scandal because it would bring ‘chaos’ to the economy.
“What would cause chaos is if a Conservative government were elected and caused public spending cuts,” he said – not sounding too confident of his own chances but quite clear on the pivotal role of public spending in any recovery strategy.
The IMF yesterday praised the government for its “bold and wide ranging” response to the financial crisis but wanted faster action to restore public finances to health once recovery was established.
“The sharp increase in public sector borrowing and contingent government liabilities, together with continued financial sector fragility, are significant vulnerabilities. In these circumstances, a severe shock has the potential to disrupt domestic and external stability,” the IMF said.
The CBI meanwhile urged Government to cut the defecit – expected by the Treasury to hit £175bn this year. “The use of heroic growth assumptions, together with a timetable extended to 2018, amounted to a serious failure to address the deficit in a way that gives confidence to buyers of our debt,” said CBI president Martin Broughton.
Meanwhile Standard & Poors this morning revised its outlook for the UK from stable to negative though the AAA long term and A-1+ short term sovereign credit ratings were affirmed. The ratings agency predicted that government debt burden could approach 100% of GDP in the medium term.
“The rating could be lowered if we conclude that, following the election, the next government’s fiscal consolidation plans are unlikely to put the UK debt burden on a secure downward trajectory over the medium term,” said credit analyst David Beers. “Conversely the outlook could be revised back to stable if comprehensive measures are implemented to place the public finances on a stable footing or if fiscal outturns are more benign than we currently anticipate.”
RBS chief economist Nigel Goddard predicted long term interest rates would head higher as the expected cost of future government borrowing increases.
Source: The New Civil Engineer
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