Ed Miliband: Cuts plan has locked UK into vicious cycle

 

Ed Miliband says the government "no longer deserves the benefit of the doubt" on the economy

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Labour leader Ed Miliband has said that the government's economic strategy is locking Britain into a "vicious cycle on the deficit".

In a speech in London, he said next week's autumn statement will show their plan "has failed" and confirm a further rise in borrowing.

Flat growth and high unemployment means it is time to change course, he says.

Prime Minister David Cameron says Labour plans to spend more are the "height of irresponsibility".

Mr Miliband told the IPPR think-tank that next Tuesday's autumn statement - in which Chancellor George Osborne will present the official economic and public finance forecasts - will "mark a crucial moment in the economic course of our country".

Analysis

Tuesday 29th November 2011, 12:30pm: "It will be the moment that we learn that the biggest economic gamble in a generation has failed." So says Ed Miliband.

In a speech this morning he tried to present the case for an alternative. He started with the now familiar act of contrition for the failings of the last Labour government on bank regulation and support for manufacturing.

He knows he must try to rebuild his party's credibility on the economy.

Then he laid out a case - "I want to convince you" - for another way. It's based on what he said were George Osborne's four criteria: growth, jobs, low inflation and borrowing targets. On each, austerity has failed, he said.

Ed Miliband is focusing his attack on the set-piece event of next week's Autumn Statement because for him it represents the coalition's core failing - it's pushing ahead with the plan, irrespective of the effects.

"It will be the moment that we learn that the biggest economic gamble in a generation has failed."

The Labour leader said on jobs, growth and inflation, Mr Osborne's promises had come to nothing. Growth had flatlined since the final quarter of 2010, he said, while unemployment had been growing since March 2011 while CPI inflation had been above 4% all year.

And on borrowing, he drew attention to the Office for Budget Responsibility's March prediction that £44.5bn of additional borrowing would be needed up to 2015-16 and suggested the figure was now forecast to surpass £100bn.

"When a further rise in borrowing is confirmed by the Office for Budget Responsibility next week, it will be a catastrophic blow to the government's credibility," he said.

Mr Miliband appealed to voters who backed the Conservatives at the general election, because they believed their deficit-reduction plan was right, to "look afresh at the evidence".

He said that the reason the government "no longer deserves the benefit of the doubt, is that even on this measure - the central test they set themselves - the plan isn't working".

"It isn't working because their failure to get businesses growing, to see more jobs created, has locked them and the country into a vicious cycle on the deficit," he said.

'Chilling effect'

"We need to ask why, when the recovery was underway just 17 months ago, we have ended up in such a serious situation."

He said the government was wrong to blame the eurozone crisis for slow growth - it was the "scale of shrinking domestic demand" that was holding growth back.

Start Quote

Is there a single other mainstream party anywhere in Europe who thinks the answer to the debt problem is more spending and more borrowing?”

End Quote David Cameron

"Austerity rhetoric" had had a "chilling effect on our economy", he said - and suggested the government was "shrugging its shoulders in the face of economic difficulty".

Those who criticised Labour's "five point plan" to boost economic growth - which would include a VAT cut and a bank bonus tax to fund youth employment programmes - for being too expensive should think again, he added.

"The cost of not acting is the more expensive choice - economically and socially. That is proved by the government missing its borrowing targets by over £100bn."

Earlier this week Prime Minister David Cameron told business leaders: "Getting debt under control is proving harder than anyone envisaged."

But he criticised Labour's plans for the economy at prime minister's questions on Wednesday, telling Mr Miliband: "Is there a single other mainstream party anywhere in Europe who thinks the answer to the debt problem is more spending and more borrowing?

"If you are worried about the level of debt, why are you proposing to add another £100bn to it? It is the height of irresponsibility and the reason why people will never trust Labour with the economy again."

Office for National Statistics figures out on Tuesday showed the UK's public sector net borrowing, excluding financial interventions, fell to £6.5bn in October - down from £7.7bn a year earlier - which the Treasury said showed Britain was making progress in cutting its deficit.

 

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  • rate this
    +4

    Comment number 141.

    To use an analogy if your running a household you would't stop buying essentials to pay your credit card of quicker even if it did cost more in the long run , you still have to live in the short term .

  • rate this
    +1

    Comment number 140.

    Fixing the problem is simple. The government and its agencies should BUY BRITISH, stop spending money on the EU, give 'foreign aid' as British produced goods and services.
    With this very simple and straight forward set of measures we would have jobs galore and money up to our ears.

  • rate this
    +1

    Comment number 139.

    It is the private sector including company borrowing and your mortgage and credit card debt which should be admitting "mea culpa" to more than four years income on top of less than a year's income debt by the public sector.
    "I must have it now" rather than "I'll save for it".

  • rate this
    +7

    Comment number 138.

    I really hope this is just a cynical tactic to try to score popularity with the general public by Ed. Because the alternative is a potential Prime Minister who sits and watches countries borrowing more than they can afford (and the subsequent collapse of their economies) and thinks we should do the same.

    Yep. I'd rather he was a cynic and a liar rather than an incompetent baffoon.

  • rate this
    +8

    Comment number 137.

    Miliband has lost the plot. The Labour Party talks about the economy as if this were a normal recession. Stimulating your way out of recession (i.e. the Keynesian way) only works if you were prudent in the boom time and have a surplus to invest. We have a massive debt that will cost even more to service if we adopt Ed's plan. The govt. is doing the only credible thing, for now, growth can wait.

  • rate this
    +2

    Comment number 136.

    @133 Chris. Its not just spending that got us here. It is the whole model of financing countries with bonds that are never repaid and then reissuing them to repay old the bonds. It truly is an international ponzi scheme that has been perpetrated by all governments since the 70s. It is a massive mistake to think that it is just about private vs public sector, or that it is just about 'growth'.

  • rate this
    +6

    Comment number 135.

    I don't honestly know what Miliband would do. He's not exactly got to his position based on merit. He's done what all the other well respected candidates tried to avoid and get the unions backing, guaranteeing him his place as Labour leader. Has he forgotten who wrote the Labour manifesto which lost them the election to the conservatives?

    The cuts maybe painful but are essential.

  • rate this
    +2

    Comment number 134.

    131. SlimC

    Time for a vote of no confidence??????????

    --

    In Ed Miliband? Yes.

    The Neil Kinnock of his day - unelectable.

  • rate this
    +2

    Comment number 133.

    Its simple. Spending got us into this god awful mess, its not going to get us out of it, period. Miliband is just points scoring in a terrible economic period that would have been the same for whatever party was in power, and to be frank one that labour steered us straight into the middle of. Look around we are lucky at the moment to be one of the better positions to be in.

  • rate this
    -4

    Comment number 132.

    131.SlimC
    Just now
    Time for a vote of no confidence??????????
    ---------
    I agree - I have no confidence in Milliband, nor the Labour party economic policy

  • rate this
    -1

    Comment number 131.

    Time for a vote of no confidence??????????

  • rate this
    -1

    Comment number 130.

    @18 "More borrowing = more uncertainty = higher interest rates = more to repay = less you can pump into the economy = less stimulation.

    Borrowing is what got us into this mess in the first place, not the solution"

    So you agree we are headed for an even bigger mess under this government due to their increased borrowing?

  • rate this
    +4

    Comment number 129.

    We are all to be saved by the private sector? The UK is the most indebted country in the world when private sector borrowing is included (497% of GDP). Our total government deficit is 77% GDP. Germany's is 86%. Our private sector and household debt is 420% GDP. Germany's is 198% GDP. Our government debt is too high, but that is not the whole story. (tinyurl.com/7mr5gyz)

  • rate this
    +1

    Comment number 128.

    What cuts? We are not making significant cuts. We are still spending more than we bring in with taxes and spending has just gone back to 2006 levels. Governments of all colours have overspent for decades, Labour shovelled money in and now we have to spend according to our means. Anything else is irresponsible.

  • rate this
    0

    Comment number 127.

    So public sector workers e.g Nurses, Police, Firemen etc are all on exorbitant public sector salaries and do a pointless, non-existent jobs according to you.
    --
    There are not 2.6million unemployed of these professions as you suggest in 101.

  • rate this
    0

    Comment number 126.

    121.
    Green Future

    Yeah - now go and compare our yields to countries who are able to print their own currency (USA, Japan)

    Oh look - not so pretty now is it?

    What a shame that in every war (even a class war) - the truth is the first casualty.

  • Comment number 125.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +2

    Comment number 124.

    117.Ian G-B
    Now is the time for prudence.
    ---
    Gordon Brown harped on about being 'prudent'. What a shame he never was.

  • rate this
    -6

    Comment number 123.

    Milliband is correct - only the blindest Tories thought this would ever work.

    However Ed has no alternative - so there's no point voting for him.

    If you haven't worked it out by now - it's time to take matters into our own hands.

    Your leaders have failed you

    Occupy

  • rate this
    +3

    Comment number 122.

    Stan - you dont seem to get it. the problems are so huge the medicine is rather painful. all the facts you quote may be correct but its inevitable that things will have to get a bit worse before they improve. clearly cuts in public spending will affect unemployment and so on. unfortunately there is no magic wand as you seem to think exists.

 

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