British prime minister David Cameron today sought to defuse anger over welfare cuts with pledges of support to entrepreneurs, a warning to bankers and the hint of a sweetener to come.
In his first speech as prime minister to his Conservative Party's annual conference, Mr Cameron defended the decision to scrap a universal flat-rate payout to people with children.
"You can't measure fairness just by how much money we spend on welfare," he said, adding that at a time when the state needed to cut back on spending it was right that those who were better off should shoulder part of the burden.
Under chancellor of the exchequer George Osborne’s plan, one-income families with more than £44,000 a year would lose benefits from 2013. But families with two earners would continue to be eligible, up until they earned more than £88,000 jointly.
Critics also say the government is focusing too much on cuts and saying too little about how it intends to foster growth, to the detriment of the business climate.
The prime minister sought to counteract that perception by pledging to support wealth-creators.
"I don't believe in laissez-faire. Government has a role not just to fire up ambition but to help give it flight. So we are acting to build a more entrepreneurial economy," he told his party.
He cited new apprenticeship and university places, a state-backed Green Investment Bank to help develop future technologies, infrastructure projects including high-speed rail, cuts in regulation and in corporation and payroll taxes.
"And there's another way we're getting behind business: by sorting out the banks. Taxpayers bailed you out, now it's time for you to repay the favour and start lending to Britain's small businesses again," he said.
A government source said earlier that this was a warning to banks that they should heed the government on the issue of lending or face a tough response, possibly in the form of a "financial activities tax" on profits and remuneration.
Finance minister Mr Osborne said in his June budget speech that such a tax was under study. It would be in addition to a bank balance sheet levy that comes into force next year.
Mr Cameron also slipped into his speech a reference to "recognising marriage in the tax system". Tax advantages for married couples, a cherished Conservative policy, have been on the back burner since May because coalition partners the Liberal Democrats object.
Mr Cameron's Conservatives regained power in May after 13 years in opposition but having not won the election outright they had to form a coalition with the smaller Liberal Democrats.
The coalition says its most urgent task is to avert a sovereign debt crisis by cutting spending to reduce the budget deficit from a record peacetime level of 11 per cent of GDP.
But constant talk of cuts is affecting the government's popularity before the cuts even come into effect. Polls show the Labour party edging past the Conservatives for the first time in three years, while support for the Lib Dems has collapsed.
The fallout from Monday's news of the child benefit cut has shown just what a bumpy road is ahead for Cameron, overshadowing all other issues at his party's conference. Yesterday, he made a televised apology for failing to warn voters before the May election that the controversial cut was coming.
Reuters