Prime Minister David Cameron vowed today to stick with his deep spending cuts despite fears expressed in some quarters of the economy sliding back into recession.
Addressing the World Economic Forum summit meeting at Davos, the Prime Minister said implementing the spending cut will be ‘tough’, but the economy will ‘bounce back’ if UK stuck to its plan.
Chancellor Osborne also stuck to the PM’s view at the same meeting saying the UK must ignore ‘siren voices’ suggesting a course correction.
The Labour party has accused the ministers of ‘arrogance’ saying total spending cuts amounted to £20 billion.
Labour leader Ed Miliband has said that the spending cuts are ‘hurting but not working’ after recent data showed that the economy has shrunk by 0.5 percent in the last quarter.
However, the PM said in his speech that ‘Given the traumas of recent years, the recovery was always going to be choppy’.
Terming the budget deficit as ‘unsustainable’, the Prime Minister said that the government is trying to boost economic growth while reducing borrowings.
“It is going to be tough but we must see it through”, said Mr. Cameron adding that “The scale of the task is immense so we need to be bold in order to build this economy of the future. The British people know these things. They understand there are no short cuts to a better future”.
Presenting recent statistics, he said “Not long ago we were heading towards the danger zone where markets start to question your credibility”.
“Yet in the past eight months we’ve seen our credit rating – which was on the brink of being downgraded – affirmed at the AAA level. We’ve seen market interest rates – which were in danger of spiralling upwards – actually fall.
“All this has happened not in spite of our plan to cut the deficit, but because of it. That’s why we must stick to the course we have set out”, he said indicating that the economy is slowly making progress.
However, the PM’s vision has been subjected to much criticism at home with the outgoing CBI head Sir Richard Lambert accusing the coalition government of lacking both ‘pro-growth’ strategy and ‘lack of vision’ for the economy in the long run.
London’s mayor Boris Johnson, also present in the meeting said the coalition government must move away from the Labour’s “miserable and anti-wealth creation” tax regime.
Mr. Osborne echoed the Mayor’s sentiment while he announced in Davos that he wants the UK to have the “most competitive business tax regime” among western economies and promised to announce ‘bold’ initiatives in his March budget to stimulate enterprise.
“Our competitiveness has suffered a lost decade”, he said adding “This is why the coalition government will be just as bold in promoting enterprise as we have been in dealing with the deficit”.
He said newly commercialized patents will be taxed at a lower rate from 2013 and the tax code will be reformed to arrest the trend of companies shifting their headquarters outside the UK.