Clegg risks coalition rift with attack on cuts

LONDON Thu Jan 24, 2013 11:42pm GMT

1 of 2. Britain's Prime Minister David Cameron (R) and Deputy Prime Minister Nick Clegg give a speech at London Midland railway's Soho depot in Smethwick in this file photo taken July 16, 2012.

Credit: Reuters/Tim Ireland/POOL

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LONDON (Reuters) - Prime Minister David Cameron risked harming the economic recovery early in his premiership because his flagship austerity policy cut spending too deeply, his deputy said on Thursday, in comments that could deepen rifts in the coalition government.

Nick Clegg, leader of the Lib Dems, said it had been a mistake to make such big cuts to capital spending, an area that includes new roads, schools and hospitals.

His comments came a day before official figures are expected to show the British economy shrank in the fourth quarter of 2012 and risks falling into its third recession since the financial crisis if the weakness persists early this year.

A bleak set of GDP figures on Friday would cast more doubt on Britain's triple-A credit rating and pile pressure on Cameron and Chancellor George Osborne to soften their austerity measures and do more to stimulate the economy.

"If I'm going to be sort of self-critical, there was this reduction in capital spending when we came into the coalition government," Clegg said in an interview with The House, a weekly political magazine.

"We have all realised that you actually need, in order to foster a recovery, to try and mobilise as much public and private capital into infrastructure as possible."

Cameron and Clegg made reducing Britain's budget deficit - which hit a record 11.2 percent of GDP before the 2010 election - their biggest priority when they came to power.

The main opposition Labour Party repeatedly attacked their public spending cuts, saying attempts to balance the books were too strong and too deep and had choked the economic recovery.

In December, the government set out new measures aimed at boosting growth, including looser planning rules and investment in railways, roads and schools.

RATINGS SLIDE

Clegg and Cameron promised this month to stick with their coalition until an election due in 2015, despite falling out on a range of issues, most recently on Britain's ties with Europe.

Osborne said on Thursday he would stick with his fiscal plans.

The Lib Dems have seen their poll ratings tumble since they took power with the larger Conservatives. Clegg upset many supporters by breaking a promise not to raise university tuition fees and has been accused of turning his back on his party's values to maintain the coalition.

Labour, leading in polls, seized on Clegg's comments as an admission the coalition had mishandled the recovery.

"This is the first admission that this government has made serious mistakes on the economy," Labour finance spokeswoman Rachel Reeves said.

(Reporting by Peter Griffiths; Editing by Sophie Hares)

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Comments (2)
ActionDan wrote:
Labour’s economic mismanagement surely left the coalition with few options when it came to spending because there was no money left to “mobilise”.

It seems odd to me that Clegg is bashing Cameron over this, when it’s clear that our national finances were in a desperate state when they came to power.

My understanding of Keynesian economics is that the government runs a surplus during the boom years, in order to have money available to smooth the economic cycle when the bust comes. When a government overspends like crazy during boom years, they are setting the next government up to fail!

But for now, Labour appear to be pulling the wool over the eyes of much of the electorate, and Clegg’s just given them a helping hand.

Jan 25, 2013 10:18am GMT  --  Report as abuse
AlisdairWilkes wrote:
Quite right.

Also a number of the CapEx programs in the last government (e.g School Building Program [average £50m per school], most defence procurement [largely not even funded]) were full of mismanagement and in some cases blatant corruption.

Jan 25, 2013 2:41pm GMT  --  Report as abuse
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