UK Politics

Clegg warns that economic situation is deteriorating

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Media captionNick Clegg: "There are levers we can pull to stimulate growth"

Nick Clegg has issued a warning about the state of the global economy and vowed to do more to boost UK growth.

The deputy prime minister said there was "little margin for error" but denied the government is helpless in the face of the worsening outlook.

In a speech in London, he said 40 major infrastructure projects, such as Crossrail and new broadband networks, are to be given "priority status".

Labour have urged ministers to change course and scale back spending cuts.

But Mr Clegg insisted there would be "no deviation" from the coalition's deficit reduction plan and said Labour's plan would lead to "soaring interest rates and crashing credibility".

'Jobs needed'

Shortly before Mr Clegg's speech to the London School of Economics, figures showed unemployment rose by a further 80,000 to 2.51 million in the three months to the end of July.

The Lib Dem leader said "the country needs jobs and time is no longer on our side".

Severe external pressures, such the eurozone debt crisis, weak US growth and rising oil prices, had led to a "dramatic change" in the international situation in the past six months, he acknowledged.

Ministers were "not blind" to the deterioration in conditions and recognised the "economic context was much worse than before".

"So the reality we face is stark," he said.

"There is now little margin for error. But that does not mean we are helpless. It does not mean we intend to sit on our hands while the economy falters."

Key projects

Hinting at further growth-related announcements in the coming weeks, he said delivering infrastructure projects as quickly as possible was one way of making a difference right now.

Ministers would scrutinise 40 key public works, such as broadband roll out, motorway improvements and upgrading the national grid, to prevent hold-ups and "get the money out the door".

Image caption Ministers are to run the rule over 40 key projects to make sure they are progressing properly

Chief Secretary to the Treasury Danny Alexander has spoken to top civil servants in every government department in recent days to ensure all money earmarked for capital spending is being utilised and not stockpiled.

However, Mr Clegg said the emphasis was on preventing "slippage" in the delivery of projects rather than actually bringing forward work.

Mr Clegg stressed: "Our critics say that all this government is capable of is cuts. That, beyond lowering a few business taxes, reducing a bit of red tape, there is little else we are willing or able to do. That is absolutely wrong.

"We can do more, we are doing more, we will do more."


The BBC News Channel's Chief Political Correspondent Norman Smith said the speech represented the most pessimistic analysis of the economy's prospects by a senior minister for some time and there was clearly a "cold sweat" at the top level of government about the issue.

Labour said a credible growth plan was crucial to bringing down the deficit in the long term and they repeated their calls for a cut in VAT to boost demand and extra support for housebuilding.

"Nick Clegg says that the government is not going to sit on its hands while the economy falters, but that is exactly what he and George Osborne are doing," said Angela Eagle, Shadow Chief Secretary to the Treasury.

"His speech today merely says ministers will turn up for work and make sure those projects which haven't been cut are delivered on time.

"No investment is being brought forward to support jobs and the stalled economy now and the government is simply pressing ahead with cuts and tax rises that go too far and too fast."

UK economic growth slowed to 0.2% between April and July and Chancellor George Osborne is widely expected to downgrade forecasts for 2011 in his autumn statement in November.

During Prime Minister's Questions, David Cameron said the employment data was disappointing but the government had taken a range of steps to help struggling businesses and families.

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