Growth plans fit with deficit cutting-PM

LONDON Thu Jan 7, 2010 7:54pm GMT

Britain's Prime Minister Gordon Brown takes a seat before meeting Brazil's President Luiz Inacio Lula da Silva at an event during the United Nations Climate Change Conference at the Bella Centre in Copenhagen December 16, 2009. REUTERS/Chris Ratcliffe/Pool

Britain's Prime Minister Gordon Brown takes a seat before meeting Brazil's President Luiz Inacio Lula da Silva at an event during the United Nations Climate Change Conference at the Bella Centre in Copenhagen December 16, 2009.

Credit: Reuters/Chris Ratcliffe/Pool

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LONDON (Reuters) - The government's efforts to engineer an economic recovery are compatible with tackling the record budget deficit, Prime Minister Gordon Brown said on Thursday.

With Britain 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 MPs 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 in London 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 his 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.

GROWTH AND DEBT

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.

"The government's track record on narrowing the deficit is shocking."

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. The revolt had petered out by Thursday.

"Returning the British economy to sustainable growth will be critical to paying down the high levels of public borrowing incurred in preventing the collapse of our own banking system and supporting people in business through the downturn," the government said in its "Going for Growth" document.

"Growth creates jobs and raises standards of living. Growth provides the fiscal strength that supports high quality public services. This is why growth matters," it added.

Labour wants to focus investment in areas that will make Britain more competitive in the future, such as biotechnology and low carbon industries.

(Editing by Andy Bruce and Chris Pizzey)

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