THE Labour government’s efforts to engineer an economic recovery are compatible with tackling the record budget deficit, British Prime Minister Gordon Brown said yesterday.
With the country emerging from its worst recession in decades, policymakers are trying to support the recovery while also reassuring sceptical financial markets that plans to halve the deficit over four years are watertight.
Labour politicians argue that getting the economy going again after a year and a half of recession is the best way to bring down borrowing in the long run, but critics say failing to deal with the debt quickly will drive up interest rates.
“Our strategy for growth is not at the expense of our deficit reduction plan,” Brown said in a speech setting out government plans to rebuild the economy after the deepest recession in more than 50 years.
Brown said last weekend there might be scope to boost support for public services if the economy rebounds faster than expected, leading to talk of a split with chancellor Alistair Darling who wants to try to cut debt quicker if growth is surprisingly strong.
The Conservatives, tipped to win an election due by June, want to slash the deficit faster than Labour, fearing a downgrade to Britain’s top credit rating.
Government officials have dampened down talk of a big difference in policy approach between Brown and Darling but many economists doubt the sincerity of Labour’s deficit reduction plans. “You could have slightly better growth and mechanically that makes the public finances better, but I think they are missing the point ... it’s going to take more than good growth to reverse,” said Alan Clarke, an economist at BNP Paribas.
Brown was speaking at his first major public appearance since two former cabinet ministers called for a ballot on his leadership before a general election due by June.
City A.M. Reporter