DAVID Cameron will today say his government must “stick to the course” on economic policy, despite a leading business organisation downgrading its growth forecasts.
Speaking just two weeks ahead of the Budget, the Prime Minister will admit that some people think his economic approach is stubborn but “there are signs that our plan is beginning to work”.
“My motives for sticking to the plan are exactly about doing the right thing to help families and business up and down the country,” he will tell an audience in Yorkshire.
However this morning the British Chambers of Commerce announced it has halved its GDP growth forecast for this year to 0.6 per cent, while also cutting its prediction for 2014.
John Longworth, director general of the BCC, said the outlook showed decisive action was needed in the Budget: “This requires a focus on implementing measures that will boost growth, such as the movement of the business bank from rhetoric to reality, increasing the availability of access to finance, and delivering key infrastructure projects.”
Business secretary Vince Cable has also raised the prospect of borrowing more to fund infrastructure spending, exposing divisions within the coalition on economic policy.
In an essay for today’s New Statesman the Lib Dem cabinet minister says the government should consider taking advantage of record low interest rates: “One obvious question is why capital investment cannot now be greatly expanded. Pessimists say that the central government is incapable of mobilising capital investment quickly. But that is absurd.”
He goes on to suggest that if the government borrowed heavily to build schools, roads and housing it “would inject demand into the weakest sector of our economy – construction – and, at one remove, the manufacturing supply chain (cement, steel). It would target two significant bottlenecks to growth: infrastructure and housing.”
Last night the Institute of Economic Affairs’ Ruth Porter said the Budget should instead concentrate on tax reforms: “With a stagnant economy and rising living costs it is more urgent than ever that this Budget focuses on how to reduce the obstacles business is facing. Addressing the high effective marginal tax rates in our current system should be a priority.”