BRITAIN FACES “a long hard road back to prosperity”, deputy prime minister Nick Clegg warned yesterday, amid growing concern grows within the Conservative-Liberal Democrats coalition over economic growth.
A variety of economic data in recent days have given conflicting signals about the state of the UK economy, but the fall in economic output in the last three months of 2010 has left ministers deeply worried.
The Institute of Fiscal Studies (IFS) warned this week that a plan to take all of those earning less than £10,000-a-year out of the income tax net could see increasing numbers of middle-income earners having to pay a 40 per cent income tax rate.
“Clearly if you are going to lower taxes dramatically for people on lower and middle incomes you need to find the money from somewhere because we’re not going to borrow it. We need to rebalance the tax system,” Mr Clegg said.
In a report, the IFS said 850,000 more people will fall into the 40 per cent net, but Mr Clegg said: “In many respects, these are people who are paying a higher rate of tax on a very, very small proportion of their earnings.”
In a speech in Rotherham in Yorkshire, the Liberal Democrat leader acknowledged last week’s economic figures were “disappointing”, but he blamed the previous Labour government, saying it had left a poisoned inheritance.
“They left us well and truly in the red. This year we’ll be spending over £43 billion just on the interest on our debts. That’s £830 million per week, just under £119 million a day. For that money, we could build a new primary school every hour.
“We could buy a new Chinook helicopter every day. We could take 11 million people out of paying income tax. We could triple the number of doctors in our hospitals,” he declared.
Urging voters to take a long view, Mr Clegg said politicians facing economic troubles often attempt to “churn out initiative after initiative, in a desperate attempt to stimulate the economy or – all too often – to try and give the appearance of doing so.
“Politicians can fall prey to the myth that somewhere there is a lever they can pull to generate growth and that they should simply pull as many as possible in the hope of finding it.
“We have learned, the hard way, that an economy built on debt is built on sand.”
Responding to demands that the coalition should soften its spending cuts plans, Mr Clegg insisted there is no alternative but to get the UK’s current spending back into the plan by the end of the government’s term in office because the coalition had inherited “a failed economic model of economic growth based on debt and on financial services”.
He went on: “There is a moral dimension to this question too. I have never understood those who say it’s more ‘progressive’ to delay tackling the deficit, so that we shuffle off responsibility for our debts to the next generation to deal with. This strikes me as little short of intergenerational theft.”
Buoyed up by a belief that Labour’s preference for more slowly implemented spending cuts is being validated by economic trends, the Labour leader, Mr Ed Miliband said the younger generation is facing worse prospects than their parents.
“Less than one out of 10 people think the next generation is going to have an easier life than them,” he said.
“It’s the worst of short-termism to cut the deficit in the way they are doing. It’s not long-termism to take away the ladders from future generations.”
