Liberal Democrats plan spending rise once deficit cleared

LONDON Tue Feb 11, 2014 7:28am GMT

LONDON (Reuters) - Deputy Prime Minister Nick Clegg said on Monday he would raise public spending in line with economic growth as soon as Britain's public finances are back under control, as he set out his party's policies before a 2015 election.

Clegg, a Liberal Democrat and leader of the junior partner in Britain's two-party coalition, said he was committed to balancing the country's books by 2017-18. But he said that once that target was achieved he wanted investment in schools, health care and other services to rise as the economy grows.

"Once we've completed the fiscal consolidation and the economy is growing, the services the nation relies on should benefit from that growth," he said in a speech.

"I expect the best way to do this will be broadly to maintain the share of our nation's wealth used to deliver public services and investment."

His address was the latest Liberal Democrat effort to differentiate their party from Prime Minister David Cameron's Conservatives as the coalition nears its final year.

Conservative finance minister George Osborne has said he wants to use further spending cuts, with a focus on the welfare budget, to reduce the deficit and generate a budget surplus by 2018/19.

Despite polls showing the Liberal Democrats have only 10 percent of public support, they could gain an influential role in the next government if next year's election fails to produce a clear winner, as was the case at the last election in 2010.

The opposition Labour party is currently forecast to win the election with 39 percent of the vote, 4 percentage points ahead of the Conservatives.

MIDDLE GROUND

In 2010 the coalition agreed on a programme of spending cuts and austerity after inheriting Britain's largest-ever peacetime deficit. But with an election in sight and a recovery under way, the two parties' policies are beginning to diverge.

Seeking to position himself in the political middle ground, Clegg criticised the Conservatives' plan to reduce the deficit through spending cuts as too harsh, while also damning left-leaning Labour for not being tough enough on spending.

"On the left we have the prospect of an unaffordable, bloated state built on irresponsible borrowing, unsustainable debt, spending for spending's sake," Clegg said.

"On the right, talk of an ever-shrinking state, in other words, cuts for cuts' sake. And both are, in my view, putting ideology ahead of good sense."

Labour has committed to deliver a budget surplus if it wins power, but has been criticised for leaving scope for more government borrowing by excluding infrastructure spending from their calculations.

Seeking to avoid similar accusations, Clegg declared a reduction in Britain's debt to economic output ratio as a priority. He said a failure to reduce the ratio would place an unsustainable burden of interest payments on the country's finances and could end up spooking international investors.

"As we have seen in other European countries, when a country loses control of its finances it is the poorest who suffer most. I want us to get into government again to finish the job we've started, to finish it fairly."

(Editing by Mark Heinrich)