DAVID Cameron will today take to the stage at the World Economic Forum in Davos with a defiant message for those insisting the government needs to slow its cuts in light of a fourth-quarter shrinkage of the economy last year.
“Those who argue that dealing with our deficit and promoting growth are somehow alternatives are wrong. You cannot put off the first in order to promote the second,” he will tell delegates. “We must see it through. The scale of the task is immense... The British people know these things. They understand there are no short-cuts to a better future.”
His comments come just a few days after billionaire investor George Soros said in the same venue that chancellor George Osborne faces a tough choice between growth and budget cuts.
The government has faced calls for it to temper its plans to cut spending down from 11 per cent of GDP to one per cent in five years after the Office for National Statistics released figures indicating that the UK economy shrank by 0.5 per cent in the fourth quarter of 2010.
In a speech later today, Osborne will tackle the data release head-on: “Many European governments face this challenge,” he will say. “But as this week’s growth figures demonstrate, the challenge is particularly acute in the UK.”
Britain had “the biggest housing boom, the most leveraged banks, the most indebted households, the biggest budget deficit. An illusion of growth built on easy money that has now turned to dust,” he will say. “It’s clear that for some that temptation remains – a bit more government spending here, pumping the bubble back up a bit there.”
The GDP release has seen the UK raised repeatedly at Davos as evidence that many parts of Europe could be in for a period of “staglation” – inflation and low growth. Economist Nouriel Roubini said earlier this week that the UK was “already double-dipping”.
But thinktank, the OECD, has supported the coalition’s intention to continue with its plans saying they are “necessary” for long-term growth despite the “short-term implications.”