MANCHESTER, England (Reuters) - The world stands on the brink of another economic crisis and Britain faces a long road back to prosperity, Prime Minister David Cameron said on Wednesday, offering no “short cuts” to growth as his coalition sticks doggedly to its austerity plan.
The government is looking at ways to ease the flow of credit to business and the Bank of England may pump more money into a stagnant economy as soon as Thursday, although Britain’s economic fate hinges on resolving the crisis in the euro zone, ministers say.
Cameron’s set-piece speech to his Conservative party annual conference was overshadowed by fresh evidence that Britain’s economy hardly grew at all in the nine months between October last year and June of this year.
Under pressure to soften spending cuts that will cost more than 300,000 public sector jobs, the Conservative leader insisted the only way to get Britain moving forward was to put its public finances in order and build a new economy based on advanced manufacturing, life sciences and technology.
“Our plan is right. And our plan will work. I know you can’t see it or feel it yet ... But this is the crucial point: it will only work if we stick with it,” he said in Manchester.
“I know how tough things are. I don’t for one minute underestimate how worried people feel, whether about making ends meet, or the state of the world economy. But the truth is, right now we need to be energised, not paralysed by gloom and fear.”
He toned down an earlier draft of the speech that some newspapers had interpreted as a call for consumers to stop spending altogether and pay off their credit cards at a time when retailers are struggling.
The main economic message from the ruling party this week has been for Britons to grin and bear it while ministers clear the debt and rely on the Bank of England to spur growth by keeping interest rates low.
With a national election due in 2015, the coalition has time on its side.
The centre-right party remains the most trusted on the economy but analysts say they will be judged harshly if the economy has not turned before the next election.
Cameron repeatedly stressed the importance of leadership, playing on the perceived weakness of Labour leader Ed Miliband who took charge of his party after it was ousted from power last year.
The coalition government’s growth strategy has been criticised for focussing too heavily on long-term changes such as building better infrastructure and rebalancing the economy towards manufacturing and exports.
“Given the rhetoric that we’ve had about the depth of the mess that we are in, I’m surprised that the rhetoric is not matched by equivalent urgency in terms of policy,” said Simon Lee, senior politics lecturer at University of Hull.
Critics also say Britain’s social fabric is being damaged by austerity, pointing to rising unemployment and the summer riots.
The opposition Labour party said Cameron’s speech showed the government was out of touch with the concerns of citizens struggling to make ends meet.
“On the day that official figures confirmed the economy has stagnated since last autumn, David Cameron told Britain that he would continue with an austerity plan which is hurting but not working,” said Labour lawmaker Chuka Umunna.
Unions are mobilising, with public sector unions planning another day of strikes over pension reform next month.
“If the prime minister really felt the nation’s pain, he would change course. Our economic difficulties have gone well past the point where ‘can-do’ optimism can make a difference,” said Brendan Barber, leader of the TUC union umbrella group.
Government officials say there is no effective way to insulate the economy against a debt crisis in Europe, Britain’s main trading partner — an irony given that Britain has made a virtue of staying out of the European single currency.
“The threat to the world economy, and to Britain, is as serious today as it was in 2008 when world recession loomed,” Cameron said. “It is an anxious time.”
Despite Britain’s dependence on European export markets, Cameron said he would not “let us get sucked into endless bailouts of countries that are in the euro.”
Cameron has argued that Britain, with a deficit running close to 10 percent of national output, has to cut its mountain of borrowing or face the wrath of financial markets that have brought peripheral euro zone nations to their knees.
The Institute of Fiscal Studies, a respected think tank, told Reuters on Monday that Britain’s tax and spending squeeze could drag on for two years longer than originally planned.
The head of the British Retail Consortium told Reuters that high street stores faced 18 months of gloom as consumers cope with rising prices and growing unemployment. Leading supermarkets Tesco and J. Sainsbury Plc reported disappointing sales and growth figures on Wednesday.
Editing by Andrew Heavens