Pressure on Cameron grows as double dip looms
Economists and critics are lining up to urge Cameron and Osborne to rethink the austerity measures
David Cameron is coming under increasing pressure to abandon - or at least modify - the austerity measures he and Chancellor George Osborne have imposed on the UK. Some critics have been there right from the start: others are joining since the shock 0.5 per cent fall in GDP in the last quarter.
A defiant Cameron said at Prime Minister's Questions on Thurday: "The worst thing to do would be to ditch your plans on the basis of one quarter's figures".
And at Davos today he will tell the World Economic Forum that his government will not be diverted. "Our first priority is to kill off the spectre of massive sovereign debts," he is due to say. "Those who argue that dealing with our deficit and promoting growth are somehow alternatives are wrong."
Yet Cameron's tactics are being opposed daily by a growing number of dissenters who argue that he must change course before it's too late.
Respected economists believe the coalition government must put in place a growth plan. A putative growth white paper has never seen the light of day, with one cabinet minister telling the Financial Times an early draft of it was "completely vacuous".
Many commentators are also uttering the dreaded words 'double-dip recession'. All that is needed for the doomsayers to be proven right is negative growth in the current (January-March) quarter following the 0.5 per cent contraction in the final quarter of 2010.
With the VAT hike from 17.5 to 20 per cent, and prices rising fast in a period of zero wage rises - not to mention the possibility of further snow putting a brake on consumption over the next two months - the double-dip nightmare cannot be ruled out.
WHAT CAMERON'S CRITICS ARE SAYING:George Soros: "I do not think [the austerity measures] can be implemented without pushing the economy into a recession. My expectation is that it will prove to be unsustainable... I think [the coalition] will probably have to modify it when the effects are felt."
David 'Danny' Blanchflower, former Monetary Policy Committee member, in Business Week: "Britain now looks as if it is headed back into recession on fear about the damage that will be done by massive spending cuts and tax increases, which haven't even gone into effect yet. Government ministers with their talk of austerity have already smashed confidence."
Ed Miliband, at Prime Minister's Questions: "Why don't you just for once put your arrogance aside and admit you know how to cut jobs but you have absolutely no idea how you are going to create them?"
Gordon Brown on CNBC News: "You've got to have a deficit reduction plan that doesn't impede growth, particularly in the sensitive months when you come out of the recession. We should be going for a global growth plan that matches the new consumer spending that is likely to happen in Asia."
Richard Ehrman, former government adviser, writing on The First Post: "Whatever they [the coalition] may say in public, it would be surprising if in private they are not hurriedly looking at how Plan A could be scaled back, should growth fail to recover as the year unfolds."
Ed Balls, Shadow Chancellor: "The fact is cuts which go too far and too fast will damage our economy. And shrinking growth and rising unemployment is not only bad news for families but will actually make it more difficult to get the deficit down... Simply slamming on the brakes is not a credible economic policy."
Tim Leunig, in the Financial Times: "We need growth. Here the coalition's policy has been little short of a fiasco. Having committed to a growth white paper they discovered neither they nor their civil servants had many good ideas about how to move forward."
John Evans, of the Organisation for Economic Co-operation and Development (OECD): "What I don't see happening and what you need is a medium-term strategy to get people into jobs. I see the UK's austerity as a vicious circle, not a virtuous circle."
Angela Eagle, Shadow Chief Secretary to the Treasury: "David Cameron and George Osborne's boasts before Christmas that Britain was recovering and out of the danger zone are looking pretty hollow now the economy has ground to a halt and unemployment and inflation are rising. Cutting too deep, too fast, is not the best way to get the deficit down." ·
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