Softer Cameroon

29 January 2010 By Hugo Dixon

The Tory leader now says extensive cuts may not be needed immediately if he wins the coming UK election. That may reduce the risk of a doubledip recession. But quick decisions will still be needed even if savings don’t come overnight. Otherwise, the UK could end up like Greece.

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An incoming Conservative government would not need to introduce "extensive" cuts in the fiscal deficit as soon as it took power, David Cameron said.

Addressing an audience of British business leaders at the World Economic Forum in Davos, the leader of the UK's Conservative party said that it was important to make "an early start" on cutting the deficit. But he said that early action "doesn't have to be extensive".

Cameron has for many months been arguing that the government's plans to rein in the deficit are not ambitions enough. His latest comments appear to amount to a modification in his rhetoric. Earlier this week, official statistics showed that the UK emerged from recession in the final quarter of 2009. But GDP grew only 0.1 percent, leading some economists to worry that the UK could slip back into a recession.

Cameron told the Davos audience that taking action would not cause a doubledip recession. He argued that people and companies would become more confident if they saw the government getting its own finances in order. He also said that the right fiscal policy would allow interest rates to be kept lower for longer, which would benefit the economy.

The Conservative leader agued that doing nothing on the deficit would be more damaging than taking action. He pointed to the problems that Greece was suffering as a result of not taking timely action to reduce its deficit.

Another senior Conservative official told Reuters that it was impractical to make immediate and big cuts in public spending if they won the general election, which has to take place no late than June 2010. This was because public sector salaries and social security benefits would already have been fixed for the financial year. He argued, though, that it was important to take some early decisions to show financial markets that the government was serious about cutting.

Context News

An incoming Conservative government would not need to introduce "extensive" cuts in the fiscal deficit as soon as it took power, David Cameron said.

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