The question of when exactly the Liberal Democrats u-turned over the speed of tackling the deficit reared its head again today when Bank of England Governor Mervyn King appeared before the Treasury Select Committee in Parliament.
The question of when exactly the Liberal Democrats u-turned over the speed of tackling the deficit reared its head again today when Bank of England Governor Mervyn King appeared before the Treasury Select Committee in Parliament – in particular Nick Clegg’s claim that he had changed his mind after a personal warning from the Governor.
As Paul Waugh reports, King was unhappy Clegg had used his conversation with him as an excuse. Responding to questioning from Labour MP Chuka Umunna, he said:
“I don’t think central bankers ever feel comfortable when they are drawn into comments by politicians.”
“I said nothing that wasn’t already in the public domain. My position hadn’t changed.”
Watch the exchange:
During the election campaign, the Institute for Fiscal Studies examined whether the Liberal Democrats were “planning to be more ambitious than Labour in reducing the deficit”, concluding:
“If anything the manifesto implies the opposite: it says that a Liberal Democrat government would carry out a Spending Review over the summer and autumn ‘with the objective of identifying the remaining [our italics] cuts needed to, at a minimum, halve the deficit by 2013-14’.
“At face value this might suggest a less ambitious plan to reduce the deficit overall than that implied by the forecasts in the Budget. The Budget predicted that the deficit (total government borrowing) would be down to 5.2% of national income in 2013-14, whereas halving it means that it need not be reduced below 5.9% of national income (half the 11.8% forecast for 2009-10).
“But the Liberal Democrats tell us that this promise to “at a minimum, halve the deficit” should be taken as shorthand for matching the deficit reduction path set out in the Budget. So, overall, they are no more or less ambitious than the Government.“
Indeed, in January Vince Cable had said:
“My party takes the view that the government’s eight-year plan, with a four-year halving of the deficit, is a reasonable starting point…
“The time to start cutting the budget deficit and its speed must be decided by a series of objective tests which include the rate of recovery, the level of unemployment, the availability of credit to businesses and the government’s ability to borrow in international markets on good terms.”
Of course the Lib Dems now support an additional £32 billion of spending cuts above and beyond Labour’s plans in this parliament; as Waugh points out, Clegg initially put this down to a the result of a private conversation with the Governor, telling The Observer:
“He [King] couldn’t have been more emphatic. He said: ‘If you don’t do this, then because of the deterioration of market conditions it will be even more painful to do it later.'”
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