David Cameron under pressure over high deficit
The Prime Minister launched a defence of his government’s record as Wednesday’s autumn statement looked set to be overshadowed by lower than expected tax revenues and another public spat between the Tories and their Lib Dem coalition partners.
With five months to go before the election Lib Dem Deputy Prime Minister Nick Clegg used the run up to the Autumn Statement to attack the Tories for promising £7 billion of tax cuts by raising the basic rate and higher rate thresholds to £12,500 and £50,000 respectively.
Meanwhile Labour leader Ed Miliband used a speech in London to claim that the coalition has missed out on £116.5 billion.
And with the economy expected to be the central issue in next May’s election a ComRes poll revealed that the Tories have a much higher rating than Labour on being stewards of the country’s finances.
While 43 per cent believe that Mr Cameron and Chancellor George Osborne would be better just 32 per cent gave a positive response for Mr Miliband and shadow Chancellor Ed Balls.
However, in a blow to the Tories, the Institute for Fiscal Studies (IFS) warned that there would be “some bad news”, with the deficit set to be higher than expected - a situation that may continue for some years.
Paul Johnson, director of the respected IFS think tank, said: “I think there will be some bad news. I don’t think it’s going to be bad news on the scale that we got used to in 2011 and 2012 when the economy was doing very much worse than had been expected.
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“But, because the shape of the recovery has been very poor in terms of the levels of earnings and productivity growth that we have seen, I expect the independent Office for Budget Responsibility to say that the deficit will be somewhat higher this year than they had expected back in March and, indeed, that it may be somewhat higher going out over the next few years.”
Labour claimed that ordinary families were paying the price for the Chancellor’s failure to fulfil his promise at the last general election in 2010 to clear the deficit and start paying down Britain’s debt by the end of the current parliament.
The party said that figures calculated by the independent House of Commons Library showed that over the course of the current parliament, income tax receipts were £66 billion lower than originally forecast and national insurance contributions were down £25.5 billion, while social security spending is £25 billion higher than planned.
It said the loss was the equivalent of almost £4,000 for every taxpayer - resulting in persistently higher borrowing than the Chancellor had forecast.
Mr Miliband said millions of families had been left trapped in “the most prolonged cost-of-living crisis for a century”.
“For them, this is a joyless and pay less recovery,” he said.
However, Mr Cameron defended his government’s economic record.
Speaking at Stonehenge following the announcement of a £15 billion road-building package, he said: “The budget deficit is down by a third under this Government, and we will see what happens on Wednesday at the Autumn Statement.
“But the fact is we have got the nation’s finances under control and so it makes sense to spend money on long-term investments, like road and rail schemes, improvements at our ports - things that will make our economy grow faster and spread prosperity to every part of our country.”
As a pre-announcement for the Autumn Statement the government also announced a £2.3 billion infrastructure for projects in England, mostly flood defences.
The announcement will mean around £200 million will go to Scotland for infrastructure projects, however Labour said the announcement does not represent new money.
Mr Clegg also defended the coalition’s efforts to balance the books but warned that the Tory plan to eradicate the deficit in the next parliament without hitting the wealthy with extra taxes was “nonsense”.
He insisted the deficit would be “more or less” halved by the end of the parliament, but condemned the Tory approach to completing the task of balancing the books after the general election through spending cuts alone.
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