Bill Clinton has warned that Britain's spending cuts could end up raising the deficit. He is the highest profile critic yet of the coalition's economic strategy.
Bill Clinton yesterday warned David Cameron that Britain’s spending cuts could end up raising the deficit. He becomes the highest profile critic yet of the Tory-led coalition’s economic strategy.
Speaking at the annual Campus Progress conference in Washington DC, the former US President said:
“In the current Budget debate there is all this discussion about how much will come from spending cuts, how much will come from tax increases. Almost nobody’s talking about one of the central points that everyone who’s analysed this situation makes – including the bipartisan Simpson-Bowles Commission – which said you shouldn’t do any of this until the economy is clearly recovering.
“Because if you do things that dampen economic growth. And the UK’s finding this out now. They adopted this big austerity budget. And there’s a good chance that economic activity will go down so much that tax revenues will be reduced even more than spending is cut and their deficit will increase.”
The warning follows concerns a fortnight ago from the head of the respected Institute for Fiscal Studies think tank, that “the prospects for growth certainly don’t look rosy” and that a Plan B might be necessary if the OBR downgraded its predictions of growth. The chief economist of the OECD, Pier Carlo Padon, has said recently, “we see merit in slowing the pace of fiscal consolidation if there is not so good news on the growth front.” Even the IMF said earlier this month that there are, “significant risks to inflation, growth and unemployment”.
US gross federal debt (Table 7.1) was 66.1 per cent when Bill Clinton became president in 1993 and had fallen to 56.4 per cent when he left office in 2001. In 2001 – after eight years of George Bush – it had risen again to 83.4 per cent.
49 Responses to “Clinton: UK’s austerity budget could mean deficit will increase”
Politics live blog – Thursday 7 July 2011 | your news
[…] lose from missing tax revenues – which is the Balls argument. Left Foot Forward have put a 54-second video of Clinton saying this on their blog. Here’s Clinton’s key quote. In the current Budget debate there is all this discussion […]
Leon Wolfson
Josh, except public service spending ISN’T returning to that level. It’s being slashed by massive amounts more, since the Tories have business tax cuts and their own expensive pet projects to follow. More, inflation is soaring due to Tory policy, which slashes the real-world value of that expenditure.
Ed – What nonsense. It’s VERY easy to see the consequences of many actions. If you make much of the UK unaffordable to the poor, they’ll turn to crime or move to the jobless areas, for instance. This is predictable, predicted and when it happens you’ll whine endless about how Labour caused it. Sigh.
Nigel Wootton
Bill Clinton provides a simple equation. Tax-dodger Osborne’s swingeing cuts and VAT-hike mean that People’s Earnings and spending power is rapidly decreasing. Tax Revenues fall accordingly, so that now The Treasury is desperately short of money. Tax-dodger Osborne is having to borrow up to £46 Billion more, for the Treasury, which also puts up the National Debt (Tory spin + “budget deficit”) by that amount. So don’t believe any Tory deficit lies! As earnings and private spending steadily decrease, company Sales Revenues will decrease (Except for export orders) reciprocally until the country goes bust. There are numerous clamours for Plan B, but Tax-dodger Osborne continues to hoard £1.6million that he owes to the Treasury and ignores everyone’s request. The Cameron regime want to bust , then and boom the economy on cheap-jack labour just as Thatcher and Major did. The ConDem government should be out on its arse before the current Political and Criminal Corruption investigations are finished.
matthew fox
@ William
Would you like to tell me what happened to UK Manufacturing in Apr 11?
I don’t think Anon E Ratface will be too pleased.
Ed's Talking Balls
One of the few genuine laugh out loud moments I’ve had while reading this blog, Leon. Even if you had the combined talents of Adam Smith, Milton Friedman, Friedrich Hayek and John Maynard Keynes (which you clearly don’t), I wouldn’t trust you to predict the future. I suggest you market yourself as a clairvoyant, if you genuinely know what is going to happen. What will Friday’s Euromillions numbers be, by the way?
Inflation is not down to Tory policy. What simplistic nonsense.
Much of the UK is, was and forever shall be unaffordable to the poor. Much of the country is unaffordable to the moderately wealthy too. We don’t live in a utopia.
I only whine that Labour has cause or exacerbated a problem when it has. For example, running large budget deficits during a boom. Or trying to introduce ID cards against the popular will. Or hurting the poor through scrapping the 10p tax (etc…) The coalition will be responsible for its record on the economy come the next election. I will judge it then, observing economic performance in the meantime and maybe making cautious predictions on the way. I won’t, however, rush to judgment and deal in certainties one year into a term.