UK Politics

Reduce UK's debt burden, urges Nick Clegg

Nick Clegg Image copyright Reuters

The UK will be left with an "unbearable" burden of debt unless government spending is put on a sustainable footing in the long term, Nick Clegg has warned.

The deputy prime minister said his Liberal Democrats would create a "carefully calibrated approach", keeping investment in public services.

He added that Labour had a "reckless" attitude to public debt.

Labour says the Conservative-Lib Dem coalition has cut spending too quickly.

Speaking to City financiers at the Mansion House in London, Mr Clegg said that, even after the current "black hole" in the public finances had been eliminated, the UK would still owe £1.5tn - almost four-fifths the size of the country's annual economic output (GDP).

Although Mr Clegg did not set a target for debt reduction, aides pointed to a European Union assessment that a debt should be no more than 60% of GDP to be sustainable over the long term.

'Vulnerable'

Mr Clegg criticised the Conservatives over plans for £12bn of welfare cuts, saying a desire for a permanently smaller welfare state was "putting ideology ahead of good sense".

He reaffirmed the Lib Dems' commitment to the coalition's plans to balance the books and eliminate the structural deficit in the public finances by 2017-18.

Mr Clegg said: "If we leave today's debts as they are, those future pressures will be unbearable. And, if we hand over high levels of indebtedness to our children and grandchildren, all we will do is leave them more vulnerable to inevitable future shocks.

"In an interdependent global economy, downturns are inevitable. And if we go into another recession with a high debt-to-GDP ratio, it will be much harder for us to keep the confidence of creditors, to keep the cost of borrowing down."

Mr Clegg added: "And, as any good Keynesian will tell you, our ability to stimulate our economy will be massively reduced. How can any progressive advocate that? As we have seen in other European countries, when a country loses control of its finances it is the poorest who suffer most."

Criticising Labour, Mr Clegg said the party's attitude to debt was "reckless" and threatened "the stability that's been achieved".

He added: "Yes, we will need to invest. My party and I have already committed in the next Parliament to keep investing in the country's productive infrastructure for the sake of our long-term well-being.

"But it must not come at the expense of our long-term stability. Investing to drive future prosperity must be coupled with sustainable finances - and that's the balance we will strike."

Labour argues that the scope and speed of public service spending cuts by the coalition have slowed the economic recovery.

The Conservatives say the £12bn cut is necessary to balance the books and shows that the party is "on the side of hard-working people".

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