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”
Dave Citizen
@Ed – while I agree it’s not possible to be sure how the uk economy will be doing a year from now it is possible to see what direction current policies are taking us in, and what this is likely to mean for things like levels of inequality, the affordability of housing to ordinary working people or the extent to which we are dependent on international capital investment to do what we want to do in our country.
A move to a less unequal distribution of the rewards of hard work is anything but utopian. Most other EU societies do it and their majority populations enjoy a higher standard of living as a result. Getting there is about having the guts to stand on our own feet, supporting manufacturing, releasing productive assets from those who accumulate them in there own narrow interests and supporting and building the skilled workforce that offers the only realistic chance of delivering majority prosperity in future – it’s not too late to build our trains at Bombardier – that’s what more equal societies would be and are doing!
Ed's Talking Balls
Dave,
You’re right. I commend you for a more nuanced approach and avoiding certainties: this is what prediction is all about. In terms of prediction, I’m encouraged by the trends in exports and, to a lesser extent, manufacturing, while employment figures have also been encouraging. Growth is weak and predictions are being downgraded (rather proving my point that even renowned economists don’t get in right most of the time, let alone all the time) but I remain optimistic that we will return to stronger growth and that double-dip doom-mongers will be proved wrong. Interest rates have remained low and inflation is my major concern. The Bank of England is treating its target as more of a vague hope.
I don’t disagree that we should strive towards correlation between hard work and reward. Wealth inequality, to such a degree as we see nowadays, is unhealthy. Yet I find any notion of equality of outcome anathema; equality of opportunity is what society is entitled to expect. One step in the right direction would be making it impossible or highly undesirable for buy-to-let barons hoard such a scarce resource as land. It is one of the greatest scourges of our time and really must be addressed. I am appalled that none of political parties give a toss about such an important issue.
Leon Wolfson
Erm Ed? Dave said the same thing I did.
“Much of the UK is, was and forever shall be unaffordable to the poor.”
What bullshit. There are mixed communities up and down the UK right now. You’re conflating your ideal society in a decade’s time with what we have right now – which will be destroyed by the Tories.
The preductions made by the Office for Budgetry Fiddling were higher than the international ones on politician’s orders, but the repeated cuts made by every organisation, British and international, to the UK’s growth rate are because of, plain and simple, Tory policy.
We need to learn from better-balanced societies, but instead we’re very rapidly being taken in the opposite direction, which is going to do a massive amount of damage to the country (again). And yet while we agree on some things, you still defend many Tory policies…
Rubyxx
ex-President Clinton questions the wisdom of UK's austerity measures while its economy remains weak. http://t.co/pU4HBRs
Ed's Talking Balls
I don’t think that what you said first time round was the same as Dave. You replied to my comment, which warned against dealing in certainties where future economic performance is concerned, by saying ‘What nonsense. It’s VERY easy to see the consequences of many actions.’ I thought you were disagreeing what I said. If, however, you were, like Dave, admitting that none of us can know for sure but can nonetheless make predictions, then we’re in agreement. I guess what I was railing against was some unthinking commentary on the left which would have us believe that a double-dip is a foregone conclusion. Patently nonsense. Given that the figures are so mixed and ‘Plan A’ is still in its (comparatively) early stages, it’s way too early to pass definitive judgment on economic performance, either way.
Neither do I think that my comment, which you quote, is ‘bullshit’. There are very few people in the world with the means to buy property in Belgravia, Kensington, Hampstead etc. Houses in such areas cost millions of pounds and it’s not simply the poor who can’t afford to live there. That’s not my ideal society, however. Nonetheless, I think it perfectly fair that some people can afford things others can’t. To the extent that that isn’t fair, well, I’m afraid that’s life.
I was under the impression that the OBR was independent. Sneer if you will, but I’m prepared to accept that it is, although I concede that its proximity to the Treasury (and other factors) give rise to suspicion. Still, even if its predictions were more optimistic than international ones, the IMF, OECD, etc were and are all supportive of government plans on deficit reduction and have all predicted growth. And I think that the economy is a little more complicated than you give it credit for: we live in a global economy (as Gordon Brown never tired of telling us, when seeking to deflect attention from domestic budget deficits) and so are affected by myriad global issues over which the Conservative Party has no influence.
Yes, I still defend government policies in a number of areas (chiefly education) but I never want to be partisan to the point of claiming black is white. When the government gets something wrong (NHS reform, treatment of circus animals and the ringfencing of the aid budget) I won’t defend it.